If the Volatility of an Option Increases

question 138

Multiple Choice

If the volatility of an option increases:

• A) the value of a call option will increase,but a put option will decrease.
• B) the value of a call option will decrease,but a put option will increase.
• C) the value of a call option will decrease,and a put option will decrease.
• D) the value of a call option will increase,and a put option will increase.

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Definitions:

Review Period

The specified time interval after which a process or system is formally evaluated or assessed.

Safety Stock

The quantity of inventory kept on hand to prevent stockouts, acting as a buffer against demand fluctuations and supply chain variability.

Ordering Cost

Expenses associated with placing orders for goods or materials, including clerical and administrative costs, transportation, and any costs related to the ordering process itself.

Holding Cost

The expenses associated with storing unsold goods or materials, including storage, insurance, and obsolescence.