The Implied Standard Deviation Used in the Black-Scholes Option Pricing

question 10

Multiple Choice

The implied standard deviation used in the Black-Scholes option pricing model is:

• A) based on historical performance.
• B) a prediction of the volatility of the return on the underlying asset over the life of the option.
• C) a measure of the time decay of an option.
• D) an estimate of the future value of an option given a strike price e.
• E) a measure of the historical intrinsic value of an option.

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Definitions:

Low-Context Culture

A culture in which communication is explicit, messages are direct, and understanding is based more on verbal interaction than on contextual cues.

Multimodal Style

An approach to communication that combines multiple modes or methods such as text, images, audio, and video to convey a message more effectively.

Brusque

Describing a manner of speaking or writing that is abrupt and curt, often perceived as blunt or rude.

Polychronic Cultures

Societies that prioritize relationships over schedule adherence, often multitasking and valuing personal interactions.