Sample Question #48 (finance – options)
What is the lower bound for the price of a European call option on a non-dividend-paying stock? Can you derive this lower bound in a formal fashion?
Now, what if the call option is American? What if the stock pays a dividend every quarter?
(Comment: another set of esoteric questions popular with quant interviewers. The topics are covered in Hull’s popular Options, Futures and Other Derivatives textbook)