In the Black-Scholes Option Pricing Model, an Increase in Security $\sigma$

question 87

Multiple Choice

In the Black-Scholes option pricing model, an increase in security volatility ( $\sigma$ ) will cause

• A)An increase in call value and an increase in put value
• B)An increase in call value and a decrease in put value
• C)A decrease in call value and an increase in put value
• D)A decrease in call value and a decrease in put value
• E)An increase in call value and an increase or decrease in put value

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Definitions:

Uric Acid

A waste product formed from the breakdown of purines, substances found in certain foods, which is excreted by the kidneys in urine.

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Bean-shaped organs in vertebrates responsible for filtering blood, removing waste products, and excreting urine.

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The process by which the kidneys filter blood, removing excess wastes and fluids to form urine.