A. extrinsic value of European option
B. intrinsic value of option
C. extrinsic value of option
D. intrinsic value of European option
✅ The correct answer is option B.
Difference between price of underlying asset and exercise price of option is classified as intrinsic value of option. The intrinsic value of an option represents the current value of the option, or in other words how much in the money it is. When an option is in the money, this means that it has a positive payoff for the buyer.
Difference between price of underlying asset and exercise price of option is classified as intrinsic value of option. The intrinsic value of an option represents the current value of the option, or in other words how much in the money it is. When an option is in the money, this means that it has a positive payoff for the buyer.