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发表于 2010-4-22 10:59 | 只看该作者

Reading 60: Option Markets and Contracts-LOS h 习题精选

2010, methods, center, future, style
Session 17: Derivative Investments: Options, Swaps, and Interest Rate and Credit Derivatives
Reading 60: Option Markets and Contracts

LOS h: Demonstrate the methods for estimating the future volatility of the underlying asset (i.e., the historical volatility and the implied volatility methods).

 

 

 

In order to compute the implied asset price volatility for a particular option, an investor:

A)
 must have a series of asset prices.
B)
 must have the market price of the option.
C)
 does not need to know the risk-free rate.


 

In order to compute the implied volatility we need the risk-free rate, the current asset price, the time to expiration, the exercise price, and the market price of the option.

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土豆妮

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2#
发表于 2010-4-22 10:59 | 只看该作者

Which of the following methods is NOT used for estimating volatility inputs for the Black-Scholes model?

A)
 Using long term historical data.
B)
 Models of changing volatility.
C)
 Using exponentially weighted historical data.


The volatility is constant in the Black-Scholes model.

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土豆妮

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3#
发表于 2010-4-22 10:59 | 只看该作者

Which of the following best describes the implied volatility method for estimated volatility inputs for the Black-Scholes model? Implied volatility is found:

A)
 using historical stock price data.
B)
 by solving the Black-Scholes model for the volatility using market values for the stock price, exercise price, interest rate, time until expiration, and option price.
C)
 using the most current stock price data.


Implied volatility is found by “backing out” the volatility estimate using the current option price and all other values in the Black-Scholes model.

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4#
发表于 2010-4-22 10:59 | 只看该作者

Which of the following best explains the sensitivity of a call option's value to volatility? Call option values:

A)
 increase as the volatility of the underlying asset increases because investors are risk seekers.
B)
 increase as the volatility of the underlying asset increases because call options have limited risk but unlimited upside potential.
C)
 are not affected by changes in the volatility of the underlying asset.


A higher volatility makes it more likely that options end up in the money and can be exercised profitably, while the down side risk is strictly limited to the option premium.

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5#
发表于 2010-4-22 11:00 | 只看该作者

Which of the following is TRUE for an option's price? An option's price is:

A)
 a decreasing function of the underlying asset's volatility when it has a long time remaining until expiration and an increasing function of its volatility if the option is close to expiration.
B)
 an increasing function of the underlying asset's volatility.
C)
 a decreasing function of the underlying asset's volatility.


Since an option has limited risk but significant upside potential, its value always increases when the volatility of the underlying asset increases.

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6#
发表于 2010-4-22 11:00 | 只看该作者

Which of the following is TRUE concerning an option's sensitivity to volatility as a function of an asset's price? An option's sensitivity to volatility is highest when the option:

A)
 is at the money.
B)
 is in the money.
C)
 price is low.


When the option is at the money slight changes in the volatility of the underlying asset will have greatest affect on the probability of the option being in the money at expiration.

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7#
发表于 2010-4-22 11:00 | 只看该作者

If we use four of the inputs into the Black-Scholes-Merton option-pricing model and solve for the asset price volatility that will make the model price equal to the market price of the option, we have found the:

A)
 option volatility.
B)
 implied volatility.
C)
 historical volatility.


The question describes the process for finding the expected volatility implied by the market price of the option.

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