Option pricing is based on the probability of an option will have value at maturity. The main key of the option value is:
- Compare the strike price with the current market price. If the same, diekspektasikan option has a chance to 50% diexercise, because there are equal chances whether the exchange rate or an increase on the due date
- Term time. The longer the period the higher the premium because the longer time required by the option to have value. The longer period of time → higher risk
- Market price volatility. The more volatile the market price of the higher premium.
Strike price and option period chosen by the buyer. Volatility is a statistical calculation can be obtained from the historical price movements. Since the history data is not always a good predictor for the future, the expected volatility using market rates. Bervaraisi depending Volatilitias maturity and described as a curve with the same period as the yield curve.
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