Quiz Ch 16 – American Put Values and Put-Call Parity
Essentials of Investments
Bodie, Kane, and Marcus
12th Edition
What particular occurrence can result in the deviation between American put values and the implied price from put-call parity?
What particular occurrence can result in the deviation between American put values and the implied price from put-call parity?
When comparing the Black-Scholes call option value at $3.50 to the actual call price of $3.75 for a non-dividend paying stock, should we suspect that the option is __________ or that the volatility used in the model is too __________?
What term describes the standard deviation derived from solving the Black-Scholes formula to match the current market call premium?
What formula represents the Black-Scholes hedge ratio for a long call option?
How is the Black-Scholes hedge ratio calculated for a long put option?
How do the probabilities represented by N(d1) and N(d2) change in the Black-Scholes model based on the likelihood of an option being exercised?
What simplified formula does the Black-Scholes model price reduce to for call options assuming profitable exercise?
What aspect should remain constant for two options on the same stock but differing exercise prices, as per the Black-Scholes option-pricing model?
What is the intrinsic value and time value of the option given a call option with a strike price of $55 and a current stock price of $50?
What is needed to achieve perfect dynamic hedging?