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TABLE OF CONTENTS
1. INTRODUCTION................................................................................................2
2. THE FUNCTIONING OF OPTION MARKETS.............................................3
2.1. Parties in Options..........................................................................................3
2.2. Call Options...................................................................................................4
2.3. Put Options....................................................................................................4
2.4. Exercise Price................................................................................................5
2.5. American vs. European Options..................................................................5
3. OPTION PRICING.............................................................................................6
3.1. Option Pricing Principles............................................................................6
3.1.1. Factors Affecting Option Pricing.....................................................6
3.1.2. The Value of An Option....................................................................7
3.1.3. Boundary Conditions for Option Prices..........................................8
3.1.4. Put ? Call Parity.............................................................................. 10
4. OPTION PRICING MODELS............. ...