Question 1

If the stock price increases, the price of a put option on that stock __________, and that of a call option __________.

Accepted Answer

A) decreases; increases 
B) decreases; decreases 
C) increases; decreases 
D) increases; increases 
A) decreases; increases 
B) decreases; decreases 
C) increases; decreases 
D) increases; increases

Question 2

A put option is currently selling for $6 with an exercise price of $50.If the hedge ratio for the put is -0.30, and the stock is currently selling for $46, what is the elasticity of the put?

Accepted Answer

A) 2.76 
B) 2.30 
C) -7.67 
D) -2.76 
E) -2.30 
A) 2.76 
B) 2.30 
C) -7.67 
D) -2.76 
E) -2.30

Question 3

All the inputs in the Black-Scholes option pricing model are directly observable except

Accepted Answer

A) the price of the underlying security. 
B) the risk-free rate of interest. 
C) the time to expiration. 
D) the variance of returns of the underlying asset return. 
A) the price of the underlying security. 
B) the risk-free rate of interest. 
C) the time to expiration. 
D) the variance of returns of the underlying asset return.

Question 4

Other things equal, the price of a stock call option is positively correlated with which of the following factors?

Accepted Answer

A) The stock price 
B) The time to expiration 
C) The stock volatility 
D) The exercise price 
E) The stock price, time to expiration, and stock volatility 
A) The stock price 
B) The time to expiration 
C) The stock volatility 
D) The exercise price 
E) The stock price, time to expiration, and stock volatility

Question 5

Rubinstein (1994) observed that the performance of the Black-Scholes model had deteriorated in recent years, and he attributed this to

Accepted Answer

A) investor fears of another market crash. 
B) higher-than-normal dividend payouts. 
C) early exercise of American call options. 
D) decreases in transaction costs. 
A) investor fears of another market crash. 
B) higher-than-normal dividend payouts. 
C) early exercise of American call options. 
D) decreases in transaction costs.

If the stock price increases, the price of a put option on that stock , and that of a call option .

A put option is currently selling for $6 with an exercise price of $50.If the hedge ratio for the put is -0.30, and the stock is currently selling for $46, what is the elasticity of the put?

All the inputs in the Black-Scholes option pricing model are directly observable except

Other things equal, the price of a stock call option is positively correlated with which of the following factors?

Rubinstein (1994) observed that the performance of the Black-Scholes model had deteriorated in recent years, and he attributed this to

The Investment Environment

Financial Markets, Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioural Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters

Exam 21: Option Valuation

If the stock price increases, the price of a put option on that stock __________, and that of a call option __________.

A put option is currently selling for $6 with an exercise price of $50.If the hedge ratio for the put is -0.30, and the stock is currently selling for $46, what is the elasticity of the put?

All the inputs in the Black-Scholes option pricing model are directly observable except

Other things equal, the price of a stock call option is positively correlated with which of the following factors?

Rubinstein (1994) observed that the performance of the Black-Scholes model had deteriorated in recent years, and he attributed this to

The Investment Environment

Financial Markets, Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioural Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters

If the stock price increases, the price of a put option on that stock , and that of a call option .