The Primary Problem with Volatility Is That It Is Unobservable;

question 26

True/False

The primary problem with volatility is that it is unobservable; it is the only input into the option pricing formula that is determined subjectively by the trader pricing the option.

---

Definitions:

Expectancy Theory

A psychological theory that describes the motivational force behind choices individuals make, depending on their expectations of the outcome and the value they place on that outcome.

Self-Motivation

The ability to initiate and continue actions or tasks without external encouragement or pressure.

Training

An educational process that aims to enhance skills, knowledge, and competencies for a specific purpose or job.

Expectancy Theory

A motivational theory suggesting that an individual's behavior is determined by their expected outcomes and the attractiveness of those outcomes.