· Multiple Choices and fill in blanks: (3 points each) 1. Which of the following
ID: 2601512 • Letter: #
Question
· Multiple Choices and fill in blanks: (3 points each) 1. Which of the following variables in the Black-Scholes option pricing model is the n difficult to obtain? a. the volatility b. the risk-free rate c. the stock price d. the time to expiration e. the exercise price 2. Which of the following statements about the Black-Scholes model is not true? a.decreasing the volatility lowers the call price b.the expected stock price plays a role in the model c.the risk-free rate is continuously compounded d. the model is consistent with put-call parity 3. Suppose that dl (from the Black& Scholes formula) is -. Which one of the following statements is true? a. The call option is "deep in the money" b. The call option is "deep out of the money" c. The put option has the largest time value d. The put option is not "at the money" 4. In a binomial model, if the call price in the market is higher than the call price given by the model, you should a. Sell the call and sell short the stock b. Buy the call and sell short the stock c. Buy the stock and sell the cal d. Buy the call and buy the stock e. None of the above the inverse of the ratio of the up and down probabilities, respectively, and the risk- free rate 5. In a model, the value of u and d are which of the followings: a. the return on the stock if it goes up and down, respectively b. c. the normal probabilities of up and down movements, respectivelyExplanation / Answer
Ans 1 a) The Volatility
Ans 2 b) the expected stock price plays a role in the model
Ans 4 c) Buy the stock and sell the call
Ans 5 c) The normal probabilities of up and down movements, respectively
As per chegg policy, we can answer only 4 MCQ's at a time.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.