14. Which of the following statements about the volatility is not true? a. the i

ID: 2696671 • Letter: 1

Question

14. Which of the following statements about the volatility is not true?

a. the implied volatility often differs across options with different exercise prices

b. the implied volatility equals the historical volatility if the option is correctly priced

c. the implied volatility is determined by trial and error

d. the implied volatility is nearly linearly related to the option price

e. none of the above

15. The relationship between the option price and the exercise price is called

a. the gamma

b. the vega

c. the omega

d. the zeta

e. none of the above

16. What happens when the volatility is zero in the Black-Scholes-Merton model?

a. the option price converges to either zero or the lower bound

b. the option price converges to the intrinsic value

c. the option automatically expires out of the money

d. the gamma and delta converge

e. none of the above

17. Which of the following is not correct about a call

15a.the gamma

20.b.the d1and d2statistic

21.b.the volatility smile

23.b.model price equal the market price of the option

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