Arbitrage determines the maximum price of an option.

Name: Arbitrage determines the maximum price of an option.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Arbitrage involves exploiting price differences of the same asset in different markets or forms, but it does not determine the maximum price of an option. Option pricing is influenced by factors such as the underlying asset's price, volatility, time to expiration, and interest rates, typically modeled using techniques like the Black-Scholes formula.

Arbitrage Determines the Maximum Price of an Option