A diagram that illustrates the potential gains and losses from a variation in the price of an underlying asset is known as what?

Question

Quizplus · Accepted Answer

A diagram that illustrates the potential gains and losses from a variation in the price of an underlying asset is known as a payoff diagram. This diagram is also commonly known as a profit and loss diagram, and it provides a visual representation of how an option or trading strategy may perform under different market conditions. It is a useful tool for investors and traders as it helps them to understand the risks and rewards associated with different trading strategies and make better-informed decisions.

A Diagram That Illustrates the Potential Gains and Losses from a Variation