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20 Cards in this Set
- Front
- Back
Which one of the following terms is used as a shortcut means of saying "time to maturity"?
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expiry
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Delta measures the dollar impact of a change in which one of the following on the value of a stock option?
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underlying stock price
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Which one of the following is defined as an estimate of stock price volatility obtained from an option price?
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implied standard deviation
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Which one of the following is another term for implied volatility?
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implied standard deviation
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VIX represents the volatility index on which one of the following?
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S&P 500 index
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Employee stock options grant an employee which one of the following rights?
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right to buy shares of the employer's stock
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You know that a call will finish in-the-money. Based on that single piece of information, you also know which one of the following?
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A put on the same underlying asset with the same strike and expiration will finish out-of-the- money.
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Which one of the following statements is correct concerning the Black-Scholes option pricing model?
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The model expresses time in terms of years
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Which one of the following variables is NOT included in the Black-Scholes option pricing model?
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market rate of return
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Which two of the following have the greatest effect on stock option prices?
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III. underlying stock price
IV. option strike price |
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An increase in which two of the following will have a negative effect on the value of a put option?
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I. risk-free interest rate
III. underlying stock price |
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An increase in which one of the following will have a negative effect on the price of a call option?
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option strike price
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Which one of the following best describes the graphical relationship between stock prices and option prices?
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convexity
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Which of the following will result from a decrease in an option's strike price?
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I. increase in call option price
IV. decrease in put option price |
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Which one of the following statements concerning the relationship between time to option maturity and call and put prices is correct?
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Call prices tend to increase faster than put prices as the time to option maturity increases.
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Which one of the following statements concerning the relationship between the volatility of the underlying stock price, as measured by sigma, and call and put prices is correct?
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Call and put prices react fairly similarly in response to changes in sigma.
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Which option price(s) will increase when the interest rate increases?
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call only
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Which option price(s) will increase when the dividend yield increases?
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put only
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Which one of the following statements concerning option prices is correct?
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There is a relatively linear direct relationship between the volatility of the underlying stock price and option prices.
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Which one of the following situations will produce the highest call price, all else constant?
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$41 stock price; $40 strike price
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