Are option prices dependent on the interest rates?The Fixed Income section mentions interest rates do not affect options but the derivative section says the opposite.
Totally confused pls help
Option prices are affected by interest rates; that’s why we have rho: the sensitivity of the option price to the change in the risk-free rate.
Where in the Fixed Income section do they say the contrary? That’s wonky.
Thanks S 2000 magician . I think i am losing it…got confused…
My pleasure.
There is one of the factors that affect option pricing which is called rho : the rate of change in the option price with respect to the change in risk free interest rate. There is no such thing in FI.