Properties of Options (FRM Part 1 2025 – Book 3 – Chapter 13)

Master the Properties of Options for FRM Part 1 2025. In this chapter from Book 3, we walk through the six option value drivers and how they affect calls and puts, then build to upper and lower bounds, early exercise, and put–call parity including the forward price version. You’ll see how dividends, volatility, interest rates, time to expiration, and moneyness shape option prices for American vs European contracts, plus quick arbitrage checks you can use on exam day. What you’ll learn Six factors that move option prices Intrinsic value and time value Bounds for non dividend and dividend stocks Early exercise logic for calls and puts Put–call parity and violations Parity with forward prices and simple arbitrage setups For FRM (Part I & Part II) video lessons, study notes, question banks, mock exams, and formula sheets covering all chapters of the FRM syllabus, click on the following link: https://analystprep.com/shop/unlimite... AnalystPrep is a GARP-Approved Exam Preparation Provider for FRM Exams After completing this reading, you should be able to: Identify the six factors that affect an option’s price. Identify and compute upper and lower bounds for option prices on non-dividend and dividend paying stocks. Explain put-call parity and apply it to the valuation of European and American stock options, with dividends and without dividends, and express it in terms of forward prices. Explain and assess potential rationales for using the early exercise features of American call and put options. #FRM #FRM2025 #GARP #Options #Derivatives #PutCallParity #QuantFinance #AnalystPrep