An Increase in the Volatility of the Underlying Asset, All

question 6

Multiple Choice

An increase in the volatility of the underlying asset, all other things held constant, will ________ the option premium.

• A) increase
• B) decrease
• C) increase or decrease
• D) Not enough information is given.

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Definitions:

Installment Payments

A system of paying for goods or services over a period of time in regular, scheduled payments.

New Business

A venture that has been recently established, entering its initial operational stage in the marketplace.

Valuation

The process of determining the present value of an asset or a company based on earnings, market value, or other methods.

Tangible Assets

Physical assets that have value and exist in a physical form, such as machinery, buildings, and inventory.