Which of the Following Is True When Delta,but Not Gamma,is

question 10

Multiple Choice

Which of the following is true when delta,but not gamma,is used in calculating VaR for option positions?

• A) VaR for a long call is too low and VaR for a long put is too low
• B) VaR for a long call is too low and VaR for a long put is too high
• C) VaR for a long call is too high and VaR for a long put is too low
• D) VaR for a long call is too high and VaR for a long put is too high

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Definitions:

Variable Cost

Costs that vary directly with levels of production or sales volume, such as materials and labor.

Cost Structure

This refers to the types and relative proportions of fixed and variable costs that a business incurs.

Fixed Costs

are business expenses that remain the same regardless of the level of output or sales, such as rent, salaries, and loan payments.

Variable Costs

Costs that vary directly with the level of production output, including expenses like labor and material costs.