An Increase in Uncertainty Results in a Higher Implied Standard

question 32

True/False

An increase in uncertainty results in a higher implied standard deviation for the stock, which means that the writer of an option requires a higher premium to compensate for the anticipated increase in the stock's volatility. ​

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Definitions:

Factoring

Financing method where a firm sells its accounts receivables, usually to a specialized financing company, at a discount to their full value.

Receivables

Payments due from clients to a business for the delivery of goods or services that have not yet been compensated.

Collateral

An asset or property that a borrower offers to a lender as security for a loan, which the lender can seize if the borrower fails to make required payments.

Installment Loan

A loan that is repaid over time with a set number of scheduled payments.