Equation: Option on a Option (compound)

Option on a Option (compound)

created by:

Thijs van den Berg (http://www.sitmo.com)

A compound option is an option on an option. E.g. you can have the right to buy a call for 3.50 a some point of time in the future.

	Value of the call on a call at expiration
	Value of the call on a put at expiration
	A call with time to expiration T2 and strike K2
K	The strike which is the price the underlying option can be bought for

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