To Compute the Value of a Put Using the Black-Scholes

question 61

Multiple Choice

To compute the value of a put using the Black-Scholes option pricing model, you:

• A) assume the equivalent call is worthless and then apply the put-call parity formula.
• B) have to compute the value of the put as if it is a call and then apply the put-call parity formula.
• C) subtract the value of an equivalent call from 1.0.
• D) subtract the value of an equivalent call from the market price of the stock.
• E) multiply the value of an equivalent call by e−ʳᵗ.

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Definitions:

Mathematical Operator

Symbols used in mathematics to represent operations such as addition (+), subtraction (-), multiplication (*), and division (/).

Division

A mathematical operation that entails determining how many times one number (the divisor) is contained within another number (the dividend).

Wildcard

A character used in search operations to represent one or more other characters, enabling flexible searching.

Mathematical Function

A relation or expression involving one or more variables, defining how each variable is related to one another and the outcomes of specific inputs.