Quiz Ch 16 – Evaluation of Black-Scholes Option-Pricing Model
Essentials of Investments
Bodie, Kane, and Marcus
12th Edition
What conclusion does research draw regarding the efficacy of the Black-Scholes option-pricing model?
What conclusion does research draw regarding the efficacy of the Black-Scholes option-pricing model?
Given the implied volatilities for three June call options, what action might you consider if you perceive a mispricing?
How should you take advantage of undervalued puts through riskless arbitrage?
What factor contributes to a rise in the value of a put option?
Which factor does NOT contribute to the rise in the value of a call option?
Which factor does NOT contribute to the rise in the value of a put option?
The call option values typically increase when which factor decreases under equivalent conditions?
In which scenario is the gap between an option’s intrinsic value and its market value generally the widest?
Which combination reduces time value the most?
What does the hedge ratio equal in a two-state binomial option model with perfectly correlated options and stock returns?