As the Variance of the Asset Price Decreases, the Value

question 34

Multiple Choice

As the variance of the asset price decreases, the value of a call option decreases because:

• A) Downside risk is virtually eliminated.
• B) The possible payoffs increase.
• C) Downside risk is virtually eliminated while the possible payoffs increase.
• D) Downside risk doesn't change but the possible payoffs decrease.
• E) It becomes more likely that the option will finish out of the money.

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Definitions:

Siblings

Brothers and sisters who share one or both parents in common, having a unique and enduring biological and emotional relationship.

Negative Symptoms

Refers to the absence or diminution of normal social and emotional responses in psychiatric conditions, such as schizophrenia.

Acute Phase

A term often used in medicine to describe the initial period of a disease or condition, characterized by severe symptoms.

Prodromal

An early set of symptoms indicating the onset of a disease before more specific symptoms occur.