Reading 60: Option Markets and Contracts-LOS c 习题精选 label, style, center, following, 2010

土豆妮

Session 17: Derivative Investments: Options, Swaps, and Interest Rate and Credit Derivatives
Reading 60: Option Markets and Contracts

LOS c: Explain the assumptions underlying the Black-Scholes-Merton model and their limitations.

 

 

 

Which of the following is NOT one of the assumptions of the Black-Scholes-Merton option-pricing model?

A) There are no taxes and transactions costs are zero for options and arbitrage portfolios.

B) The yield curve for risk-free assets is fixed over the term of the option.

C) There are no cash flows over the term of the options.

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The yield curve is assumed to be flat so that the risk-free rate of interest is known and constant over the term of the option. Having a fixed yield curve does not necessarily imply that the yield curve is flat.

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Which of the following is least likely one of the assumptions of the Black-Scholes-Merton option pricing model?

A) Changes in volatility are known and predictable.

B) There are no cash flows on the underlying asset.

C) The risk-free rate of interest is known and does not change over the term of the option.

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The BSM model assumes that volatility is known and constant. The term predictable would allow for non-constant changes in volatility.

土豆妮

Which of the following is NOT one of the assumptions of the Black-Scholes-Merton (BSM) option-pricing model?

A) Any dividends are paid at a continuously compounded rate.

B) There are no taxes.

C) Options valued are European style.

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The BSM model assumes there are no cash flows on the underlying asset.