Business Case Studies & Business Publications

Ito's Delight

Allayannis, George...

Case

Ito's Delight

Allayannis, George (Yiorgos); Eades, Kenneth M.

F-1333 | Published July 13, 2001 | 2 pages Case

Collection: Darden School of Business

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Louise Ito examines option-pricing data from the Wall Street Journal. She wants to make sure that she understands the basic principles behind option pricing and examines whether these prices are consistent with respect to the effects of strike price and maturity. She also computes the intrinsic and the time value for each of the options and compares their relative magnitudes with what theory suggests. This case is taught during the first day in a two-day sequence of teaching the fundamentals of option pricing (second-day case: Ito’s Dilemma UVA-F-1283). The teaching note includes a teaching plan of how to effectively teach this case and includes several examples that highlight the determinants of option pricing.