Reading 62: Option Markets and Contracts-LOS d 习题精选 2011, center, option, values, price

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Session 17: Derivative Investments: Options, Swaps, and Interest Rate and Credit Derivatives
Reading 62: Option Markets and Contracts

LOS d: Explain how an option price, as represented by the Black-Scholes-Merton model, is affected by each of the input values (the option Greeks).

 

 

The value of a put option is positively related to all of the following EXCEPT:

A) time to maturity.

B) exercise price.

C) risk-free rate.

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The value of a put option is negatively related to increases in the risk-free rate.

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The value of a European call option on an asset with no cash flows is positively related to all of the following EXCEPT:

A) exercise price.

B) time to exercise.

C) risk-free rate.

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The value of a call option decreases as the exercise price increases.

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Which of the following option sensitivities measures the change in the price of the option with respect to a decrease in the time to expiration?

A) Gamma.

B) Theta.

C) Delta.

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Theta describes the change in option price in response to the passage of time. Since option holders would prefer that value not decay too quickly, an option with a low theta value is desirable.

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For a change in which of the following inputs into the Black-Scholes-Merton option pricing model will the direction of the change in a put’s value and the direction of the change in a call’s value be the same?

A) Volatility.

B) Exercise price.

C) Risk-free rate.

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A decrease/increase in the volatility of the price of the underlying asset will decrease/increase both put values and call values. A change in the values of the other inputs will have opposite effects on the values of puts and calls.