unit 4 (invts)
Quiz by Robert Couch
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24 questions
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- Q1Implies that immediate exercise would generate a positive cash flow.Black-Scholes formulain the moneyimplied volatilityout of the money30s
- Q2Implies that immediate exercise would generate a negative cash flow.Black-Scholes formulaout of the moneyin the moneyimplied volatility30s
- Q3The standard deviation of stock returns that is consistent with an option’s market value.in the moneyout of the moneyimplied volatilityBlack-Scholes formula30s
- Q4Uses the stock price, the risk-free interest rate, the time to expiration, and the standard deviation of stock returns to estimate the value of an option for that stock.implied volatilityout of the moneyin the moneyBlack-Scholes formula30s
- Q5Involves buying both a put and call option for the same expiration date and strike price on the same underlying security.collarportfolio insurancestraddledelta30s
- Q6Involves buying an out-of-the-money put option while simultaneously writing an out-of-the-money call option.collardeltastraddleportfolio insurance30s
- Q7A ratio that compares the change in the price of an underlying asset with the change in the price of a derivative or option.straddledeltacollarportfolio insurance30s
- Q8A strategy designed to protect a portfolio of investments against potential losses.straddledeltacollarportfolio insurance30s
- Q9Option values increase with greater volatility, all else equal.FALSETRUE……30s
- Q10Option values decrease with greater volatility, all else equal.FALSE…TRUE…30s
- Q11Optiona values increase with greater time-till-experiation, all else equal.TRUE…FALSE…30s
- Q12Optiona values decrease with greater time-till-experiation, all else equal.……TRUEFALSE30s
- Q13American options are typically worth more (or at least as much as) than European options.TRUEFALSE……30s
- Q14European options are typically worth more (or at least as much as) than American options.FALSETRUE……30s
- Q15If banks think the government will bail them out in the event of a crisis, this increases their incentive to take on more risk.……TRUEFALSE30s