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Call Option


A call option is an option whose holder has the right, but not the obligation, to buy an underlying asset for a specified strike price K. For an asset price S_T at exercise time T, its payoff is

 C_T=(S_T-K)^+=max(S_T-K,0),

where x^+ denotes the positive part of x. A European option has a fixed exercise time, while an American option may be exercised earlier under the terms of the contract.


See also

American Option, Black-Scholes Theory, European Option, Option, Put Option

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References

Black, F. and Scholes, M. S. "The Pricing of Options and Corporate Liabilities." J. Political Econ. 81, 637-654, 1973. https://doi.org/10.1086/260062.Merton, R. C. "Theory of Rational Option Pricing." Bell J. Econ. Management Sci. 4, 141-183, 1973. https://doi.org/10.2307/3003143.

Cite this as:

Weisstein, Eric W. "Call Option." From MathWorld--A Wolfram Resource. https://mathworld.wolfram.com/CallOption.html

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