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Option Price
AFM
answered on 28-Apr-26 14:13
Sir, Option price = PV of expected pay-offs of the option, does the pay-off here represents the pay-off for the buyer. So the price is based on how much the buyer is willing to pay for his return. [Video Time Stamp: 10:10]
latest answer
Ye Buyers Expected return itself is what he has to pay to seller for buying the option
SANJITHA
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Premium
AFM
answered on 28-Apr-26 11:54
Sir, whether premium is fixed on whole for a option contract or fixed for each unit of underlying asset as in this question? [Video Time Stamp: 08:31]
latest answer
Premia is fixed per share i.e each underlying unit because we compare premia with underlying asset's price. We do not look at premia from lot size / contract perspective
SANJITHA
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98
Doubt
AFM
answered on 27-Apr-26 17:01
If utilities are treated as weights, why are we not multiplying utilities to calculate expected cash flows?
latest answer
Utilities are not weights We are finding out EV of CF and EV of Utilities and using that to make a decision
pavan kumar
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108
doubt
AFM
answered on 27-Apr-26 16:57
Please tell us the difference between probability and certainty equivalent. [Video Time Stamp: 00:06]
latest answer
Certainty Equivalent CF is a Cash Flow that you will accept instead of an expected CF if probability weighted CF is 1000 ( 50% x 0 + 50% x 2000) you as an individual are ok to accept 800 instead of this uncertain CF which has Expected value of 1000 CE = 800/2000 = 40% Refer page 3.23 https://resource.cdn.icai.org/87844bos-aps2163-ch3.pdf
pavan kumar
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107
Doubt
AFM
answered on 27-Apr-26 16:51
Probability is always less than 1. How did we get 2.4 in project M?. For answering question (ii), why we are not using the RADR method. [Video Time Stamp: 10:12]
latest answer
Sum of Certainty equivalent is not equivalent to total probability. Certainty equivalent for a period gives probability of a specific cash flow for a specific period
pavan kumar
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144
Doubt
AFM
answered on 27-Apr-26 16:48
In the given question, we are computing NPV and comparing it with the acceptable level of risk of 20%.This is in % and the risk is in percentage terms. [Video Time Stamp: 27:50]
latest answer
We are comparing risk of 20% with 30% of poor state of economy. It is a poorly worded question by ICAI
pavan kumar
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Doubt
AFM
answered on 27-Apr-26 13:53
please tell us where to use IRR and Cost of capital for discounting. State some difference between them sir. [Video Time Stamp: 12:30]
latest answer
Sorry NPV
pavan kumar
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147
Sell Call Vs Buy Put
AFM
answered on 26-Apr-26 20:24
Sir, when an investor expects bullish market, he can either sell call for limited profit or buy put for unlimited profit. So it is always better for buying put option, so when will the investor goes for sell call? Does premium plays a role here?
latest answer
Firstly sell call or buy put are done in bearish market. Decision for a speculator to chose which one depends on a lot of factors In buy put there is no downside but premium outflow In sell call there is premium inflow and quite a bit of downside possibility if market becomes bullish It is not just premium, it also considers expected bearishness,time period, liquidity and price of options available
SANJITHA
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Present Value
AFM
answered on 25-Apr-26 17:10
Sir, while calculating future price after reduction in the share price, whether any adjustment to be done on the carrying cost as some duration has elapsed. [Video Time Stamp: 05:04]
latest answer
We are assuming change is happening on day zero and hence no change to cost of carry
SANJITHA
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104
Illustration 46
AFM
answered on 24-Apr-26 20:11
Sir what is mean by term structure of interest rate will remain the same and why we can’t use the existing YTM ie 11% and 12 % to compute the price at end of year one [Video Time Stamp: 11:07]
latest answer
Term structure
Mhd Mmp
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