Derivatives Q103

0. Analyst 1: For options, the minimum value is the greater of zero or the difference between the underlying price and the present value of the exercise price, whereas the exercise value is the maximum of zero and the appropriate difference between the underlying price and the exercise price.
Analyst 2: For options, the exercise value is the greater of zero or the difference between the underlying price and the present value of the exercise price, whereas the minimum value is the maximum of zero and the appropriate difference between the underlying price and the exercise price.
Which analyst’s statement is most likely correct?

Answer
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Option : A
Explanation : To calculate minimum value, the exercise price is adjusted for the time value of money.

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