The Vanna–Volga method to adjust for “exotic” versions of these things uses second-order sensitivities. A “smile” pattern that arises when plotting one “implied” value of these things deviates from an (-5[1])idealized model. (-5[2])Multiple of these things are combined in the “strip” and “straddle” strategies. Assuming Brownian (-5[1])motion and using Itô’s lemma gives an equation to model these things (10[1]-5[4])that won (-5[1])a Nobel (10[2])Prize for Robert (-5[1])C. (-5[1])Merton. (10[1]-5[7])These (-5[1])things, which are said (10[1]-5[1])to be “in (-5[1])the money” (10[1]-5[1])if their (10[2])intrinsic value (10[2])is positive, (10[3]-5[1])can be (10[1])priced (10[1])by the (10[1])Black–Scholes (10[3]-5[1])formula. (10[13]-5[1])Unlike (10[2]-5[2])their (10[1])American type, the (10[1])European (10[1]-5[1])type (-5[1])of these derivatives (10[1])can (10[1])only be exercised on their expiration date. (10[1]-5[2])For 10 points, what financial (-5[1])assets (-5[1])that grant the right (-5[1])to buy or sell a stock (-5[1])at a (10[1])strike (-5[1])price (10[1])include calls (10[1])and puts? (0[1])■END■ (10[19]0[12])