What is a European Put option?

Question

Quizplus · Accepted Answer

The Answer is Given an underlying variable F (t), maturity T and strike price K;aEu- ropean Put option is a contract between two counterparties, option buyer and option seller, according to which:
i. At maturity T the option buyer has the right to ask the option seller for the payment of the following e?ective payo?: Payo? = (max(K ? F (T), 0)
ii. The option seller has the obligation to pay this amount to the option buyer at T.
iii. In return for this right to obtain this payment (exercise) at T,the option buyer pays an option premium to the option seller at time 0.

What Is a European Put Option