The Upper and Lower Bounds on a Call Options Value

Now that we know how to determine C1, the value of the call at expiration, we turn to a somewhat more challenging question: How can we determine C0, the value sometime before expiration? We will be discussing this in the next several sections. For now, we will establish the upper and lower bounds for the value of a call option.

Ross et al.: Fundamentals I V. Risk and Return I 14. Options and Corporate I I © The McGraw-Hill of Corporate Finance, Sixth Finance Companies, 2002

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460 PART FIVE Risk and Return

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