Reading 71: Option Markets and Contracts-LOS p 习题精选 2011, interest, change, center, option

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Session 17: Derivatives
Reading 71: Option Markets and Contracts

LOS p: Indicate the directional effect of an interest rate change or volatility change on an option's price.

 

 

Greater volatility in the price of the underlying asset will have what effect on the value of a call option and the value of a put option?

Value of a call option

Value of a put option

A) Increase Decrease

B) Decrease Increase

C) Increase Increase

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Greater volatility in the price of the underlying asset increases the values of both puts and calls because options are “one-sided.” Since an option’s value can fall no lower than zero (it expires out of the money), increased volatility increases an option’s upside potential but does not increase its downside exposure.

luqian55

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A decrease in the riskless rate of interest, other things equal, will:

A) decrease call option values and decrease put option values.

B) increase call option values and decrease put option values.

C) decrease call option values and increase put option values.

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A decrease in the risk-free rate of interest will decrease call option values and increase put option values.

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An increase in the riskless rate of interest, other things equal, will:

A) decrease call option values and increase put option values.

B) increase call option values and decrease put option values.

C) decrease call option values and decrease put option values.

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An increase in the risk-free rate of interest will increase call option values and decrease put option values.

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For stock options, which of the following will least likely increase put option values and decrease call option values?

A) A decrease in the riskless rate of interest.

B) An increase in the riskless rate of interest.

C) An increase in the exercise price.

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An increase in the riskless rate of interest will decrease put option values and increase call option values.