When the Variance of the Underlying Asset Increases, It Would

question 315

True/False

When the variance of the underlying asset increases, it would unambiguously decrease the value of an American put option.

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Definitions:

Permanent/Temporary

A classification that distinguishes between actions or objects that are intended to last indefinitely (permanent) and those expected to change or conclude after a certain period (temporary).

Normal Balance

The side of the accounting equation (debit or credit) where increases in the account are recorded.

Financial Statement

A written report which quantitatively describes the financial health of a company, including balance sheet, income statement, and cash flow statement.

Permanent/Temporary

Refers to the classification of accounts where permanent accounts are balance sheet items that carry over into the next fiscal period, and temporary accounts are income statement items that are closed to equity at the end of the fiscal period.