Which of the Inputs in the Black-Scholes Option Pricing Model

question 81

Multiple Choice

Which of the inputs in the Black-Scholes option pricing model are directly observable?

• A) The price of the underlying security
• B) The risk-free rate of interest
• C) The time to expiration
• D) The variance of returns of the underlying asset return
• E) The price of the underlying security, risk-free rate of interest, and time to expiration

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Definitions:

Underestimate

To judge something to be smaller or less important than it actually is.

Overestimate

To assess something as more significant or numerous than it actually is, often due to overvaluation or miscalculation.

Distributed Practice

A learning strategy where practice is broken up into a number of short sessions over a longer period of time.

Proactive Interference

The occurrence in which earlier memories interfere with the retrieval of more recent memories.