Comparing price of 2 options
Quantitative Finance
Level
2
Which option is more expensive:
X - Call on the 100 strike that expires in 1 month.
Y - Call on the 100 strike that expires in 3 months.
X - There is less time to expiry
X - It has higher theta
Y - It has higher theta
Y - There is more time to expiry
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1 solution
Y - There is more to expiry - means that there is more time for Y to have a larger volatility that makes it more valuable.