Which of the Following Is True of a Gap Option

question 10

Multiple Choice

Which of the following is true of a gap option

• A) The strike price determining whether a payoff is made is not the same as the strike price determining the size of the payoff
• B) There is a straightforward valuation formula similar to Black-Scholes-Merton
• C) It describes an option where there is a cost to exercising
• D) All of the above

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Definitions:

Emotional

Pertaining to feelings or psychological states that arise in response to stimuli, affecting moods and behavior.

Exaggerated

Describes something that has been presented in a way that makes it seem more important, serious, or large than it actually is.

Temperament

Refers to the inherent personality traits and dispositions that influence how individuals respond to their environment emotionally, behaviorally, and cognitively from an early age.

Emotions

Complex psychological states that involve a physiological response and an expressive reaction to external or internal events.