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
Answer: B
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The Black-Scholes Merton Model
- S0 = 23 X = 20 rc = 0.09 T = 0.5 2 = 0.15 No dividends are expected.
- The relationship between the option price and the exercise price is called
- Which of the following "Greeks" is not a measure of the option's sensitivity to a change in one of its input values?
- Which of the following statements about the delta is not true?
- Which of the following characteristics of the Black-Scholes-Merton model is not correct?
- The binomial price will theoretically equal the Black-Scholes-Merton price under which of the following conditions?
- Which of the following variables in the Black-Scholes-Merton option pricing model is the most difficult to obtain?
- Which of the following assumptions of the Black-Scholes-Merton model is not correct?
- Which of the following statements about the Black-Scholes-Merton model is not true?
- The pattern of volatility across exercise prices is often called
- The relationship between the volatility and the time to expiration is called the
- What is the reason for executing a gamma hedge?
- Which of the following statements is true about the relationship between the option price and the risk-free rate?
- If the stock price is 44, the exercise price is 40, the put price is 1.54, and the Black-Scholes-Merton price using 0.28 as the volatility is 1.11, the implied volatility will be
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