Option Price and Interest Rates Suppose the interest rate on T-bills suddenly and unexpectedly...

Question

Option Price and Interest Rates Suppose the interest rate on T-bills suddenly and unexpectedly rises. All other things being the same, what is the impact on call option values? On put option values?

Q

Robert · Accepted Answer

Interest rate has direct impact on the value of call option and put option. It can be explained with the 
help of the no-arbitrage relations for call option and put option as given below.
Here,

Option Price and Interest Rates Suppose the interest rate on T-bills suddenly and unexpectedly rises. All other things being the same, what is the impact on call option values? On put option values? ...

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