Difficulty: Hard
Category: Options & Greeks
Practice quant interview questions from top firms including Jane Street, Citadel, Two Sigma, DE Shaw, and other leading quantitative finance companies.
Topics: options, chooser-option, put-call-parity, derivatives
You are a derivatives trader evaluating a chooser option. At time $t_1$, the holder of the chooser option has the right, but not the obligation, to choose whether the option becomes a European call option or a European put option, both with the same strike price $K$ and expiration date $T > t_1$. The underlying asset price is $S$. The risk-free interest rate is $r$. Assume continuous compounding. Which of the following expressions correctly represents the value of this chooser option at ti
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