Set of flashcards FO MPC

Flashcards	17
Language	Italiano
Category	Geography
Level	University
Created / Updated	01.01.2018 / 01.01.2018
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Which of the following is correct?

A. A calendar spread can be created by buying a call and selling a put when the strike prices are the same and the times to maturity are different

B. A calendar spread can be created by buying a put and selling a call when the strike prices are the same and the times to maturity are different

C. A calendar spread can be created by buying a call and selling a call when the strike prices are different and the times to maturity are different

D. A calendar spread can be created by buying a call and selling a call when the strike prices are the same and the times to maturity are different

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A. A calendar spread can be created by buying a call and selling a put when the strike prices are the same and the times to maturity are different

B. A calendar spread can be created by buying a put and selling a call when the strike prices are the same and the times to maturity are different

C. A calendar spread can be created by buying a call and selling a call when the strike prices are different and the times to maturity are different

D. A calendar spread can be created by buying a call and selling a call when the strike prices are the same and the times to maturity are different

Which of the following is NOT true?

A. Risk-neutral valuation provides prices that are only correct in a world where investors are risk-neutral

B. Options can be valued based on the assumption that investors are risk neutral

C. In risk-neutral valuation the expected return on all investment assets is set equal to the risk-free rate

D. In risk-neutral valuation the risk-free rate is used to discount expected cash flows

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A. Risk-neutral valuation provides prices that are only correct in a world where investors are risk-neutral

B. Options can be valued based on the assumption that investors are risk neutral

C. In risk-neutral valuation the expected return on all investment assets is set equal to the risk-free rate

D. In risk-neutral valuation the risk-free rate is used to discount expected cash flows

Which of the following describes delta?

A The ratio of the option price to the stock price

B The ratio of the stock price to the option price

C.. The ratio of a change in the option price to the corresponding change in the stock price

D. The ratio of a change in the stock price to the corresponding change in the option price

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A The ratio of the option price to the stock price

B The ratio of the stock price to the option price

C.. The ratio of a change in the option price to the corresponding change in the stock price

D. The ratio of a change in the stock price to the corresponding change in the option price

Which of the following is assumed by the Black-Scholes-Merton model?

A. The return from the stock in a short period of time is lognormal

B. The stock price at a future time is lognormal

C. The stock price at a future time is normal

D. None of the above

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A. The return from the stock in a short period of time is lognormal

B. The stock price at a future time is lognormal

C. The stock price at a future time is normal

D. None of the above

What does N(x) denote?

A. The area under a normal distribution from zero to x

B. The area under a normal distribution up to x

C. The area under a normal distribution beyond x

D. The area under the normal distribution between -x and x

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A. The area under a normal distribution from zero to x

B. The area under a normal distribution up to x

C. The area under a normal distribution beyond x

D. The area under the normal distribution between -x and x

What was the original Black-Scholes-Merton model designed to value?

a. A European option on a stock providing no dividends

b. A European or American option on a stock providing no dividends

c. A European option on any stock

d. A European or American option on any stock

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a. A European option on a stock providing no dividends

b. A European or American option on a stock providing no dividends

c. A European option on any stock

d. A European or American option on any stock

When the Black-Scholes-Merton and binomial tree models are used to value an option on a non-dividend-paying stock, which of the following is true?

a. The binomial tree price converges to a price slightly above the Black-Scholes-Merton price as the number of time steps is increased

b. The binomial tree price converges to a price slightly below the Black-Scholes-Merton price as the number of time steps is increased

c. Either A or B can be true

d. The binomial tree price converges to the Black-Scholes-Merton price as the number of time steps is increased

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a. The binomial tree price converges to a price slightly above the Black-Scholes-Merton price as the number of time steps is increased

b. The binomial tree price converges to a price slightly below the Black-Scholes-Merton price as the number of time steps is increased

c. Either A or B can be true

d. The binomial tree price converges to the Black-Scholes-Merton price as the number of time steps is increased

32 When the Black-Scholes-Merton and binomial tree models are used to value an option on a non-dividend-paying stock, which of the following is true?

a The binomial tree price converges to a price slightly above the Black-Scholes-Merton price as the number of time steps is increased

b The binomial tree price converges to a price slightly below the Black-Scholes-Merton price as the number of time steps is increased

c Either A or B can be true

d The binomial tree price converges to the Black-Scholes-Merton price as the number of time steps is increased

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a The binomial tree price converges to a price slightly above the Black-Scholes-Merton price as the number of time steps is increased

b The binomial tree price converges to a price slightly below the Black-Scholes-Merton price as the number of time steps is increased

c Either A or B can be true

d The binomial tree price converges to the Black-Scholes-Merton price as the number of time steps is increased

What does rho measure?

A. The rate of change of delta with the asset price

B. The rate of change of the portfolio value with the passage of time

C. The sensitivity of a portfolio value to interest rate changes

D. None of the above

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A. The rate of change of delta with the asset price

B. The rate of change of the portfolio value with the passage of time

C. The sensitivity of a portfolio value to interest rate changes

D. None of the above

FO MPC

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