Identifying Call Options: Understanding Strike Price and Asset Value

F is a 'call' option and the strike price is 3.

This can be determined by understanding the characteristics of a call option:

• Call Option: Gives the holder the right, but not the obligation, to buy an underlying asset at a predetermined price (the strike price) on or before a certain date.

In this scenario:

• If the asset value (S_1) at time t=1 is 3, the claim (F) is 0. This indicates the option is not exercised as the holder wouldn't buy the asset at the strike price (3) when it's already available at the lower market price (3).
• If the asset value (S_1) at time t=1 is 14, the claim (F) is 5. This indicates the option is exercised as the holder can buy the asset at the strike price (3) and sell it in the market for 14, making a profit of 11 (14-3) - 6 (the claim value).

Therefore, F exhibits the characteristics of a call option, and the strike price is the price at which the holder has the right to buy the asset, which is 3.