A derivative that gives an investor the right - but not the obligation - to buy (call) or sell (put) a security at a certain price (strike), and in which the investor makes the buy or sell decision at a specific time after the option is in force, rather than at the time of purchase. The AC-DC option is basically an option, which on a future date can become a call or put option at the buyer's discretion.

Also called a "chooser option" or "hermaphrodite option".

The value of an AC-DC option is based on a complex formula that takes all of these variables into account. An AC-DC option is a type of exotic option, meaning it has more complicated terms than traditional, plain-vanilla options.

www.tandfonline.com [PDF]

… If the stock follows a diffusion process, then the maintenance of a riskless hedge leads to the familiar BlackkScholes (1973) partial differential equation ac dc i a% -=r,Cr,S---g~S2-. at as 2 d&S2 (5) … Page 12. 74 R. Geske, Valuation of compound options of the option on the stock …

www.tandfonline.com [PDF]

… If the stock follows a diffusion process, then the maintenance of a riskless hedge leads to the familiar BlackkScholes (1973) partial differential equation ac dc i a% -=r,Cr,S---g~S2-. at as 2 d&S2 (5) … Page 12. 74 R. Geske, Valuation of compound options of the option on the stock …

www.sciencedirect.com [PDF]

… If the stock follows a diffusion process, then the maintenance of a riskless hedge leads to the familiar BlackkScholes (1973) partial differential equation ac dc i a% -=r,Cr,S---g~S2-. at as 2 d&S2 (5) … Page 12. 74 R. Geske, Valuation of compound options of the option on the stock …

link.springer.com [PDF]

… If the stock follows a diffusion process, then the maintenance of a riskless hedge leads to the familiar BlackkScholes (1973) partial differential equation ac dc i a% -=r,Cr,S---g~S2-. at as 2 d&S2 (5) … Page 12. 74 R. Geske, Valuation of compound options of the option on the stock …

ieeexplore.ieee.org [PDF]

… If the stock follows a diffusion process, then the maintenance of a riskless hedge leads to the familiar BlackkScholes (1973) partial differential equation ac dc i a% -=r,Cr,S---g~S2-. at as 2 d&S2 (5) … Page 12. 74 R. Geske, Valuation of compound options of the option on the stock …

www.tandfonline.com [PDF]

… If the stock follows a diffusion process, then the maintenance of a riskless hedge leads to the familiar BlackkScholes (1973) partial differential equation ac dc i a% -=r,Cr,S---g~S2-. at as 2 d&S2 (5) … Page 12. 74 R. Geske, Valuation of compound options of the option on the stock …

www.tandfonline.com [PDF]

… If the stock follows a diffusion process, then the maintenance of a riskless hedge leads to the familiar BlackkScholes (1973) partial differential equation ac dc i a% -=r,Cr,S---g~S2-. at as 2 d&S2 (5) … Page 12. 74 R. Geske, Valuation of compound options of the option on the stock …

ieeexplore.ieee.org [PDF]

… If the stock follows a diffusion process, then the maintenance of a riskless hedge leads to the familiar BlackkScholes (1973) partial differential equation ac dc i a% -=r,Cr,S---g~S2-. at as 2 d&S2 (5) … Page 12. 74 R. Geske, Valuation of compound options of the option on the stock …

www.tandfonline.com [PDF]

… If the stock follows a diffusion process, then the maintenance of a riskless hedge leads to the familiar BlackkScholes (1973) partial differential equation ac dc i a% -=r,Cr,S---g~S2-. at as 2 d&S2 (5) … Page 12. 74 R. Geske, Valuation of compound options of the option on the stock …

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An AC-DC option differs from other options because it can be exercised on a future date rather than immediately after purchase.

The value of an AC-DC Option is based on complex formulas that take into account all variables involved in the investment.

Some examples of an AC-DC option include convertible bonds and callable bonds.

An AC-DC option is a derivative that gives the investor the right to buy or sell a security at a certain price.

You may choose to use this type of investment over others if you want more control over your money and when you want to invest it.

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