In Example 12.1, the buyer of an Ashok Leyland call option is betting that the price of Ashok Leyland
shares will go beyond INR 47.35, which is Exercise price + Option premium paid = INR 45 + INR 2.35 =
INR 47.35, while the writer is betting that the price will not go beyond INR 47.35.
12.2 The Terminal Value of a Call Option
e value of a call option on the exercise date is known as its terminal value. Consider a European option
on the date of maturity. Since it is a European option, it can be exercised only on the exercise date, and
in order to decide whether the buyer should exercise or not, it is important for ...
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