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identify the potential reasons for options miss-pricing

Finance Jan 19, 2021

identify the potential reasons for options miss-pricing

Expert Solution

The reasons for options mis-pricing are :

i) Underlying Price - If the underlying price is mispriced then the option price is mispriced .

ii) Implied Volatility - it is a estimated factor which can be incorrect which will lead to mispricing .

iii)Dividend - Options do not receive , so their value fluctuates when dividends are released .

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