In the Black-Scholes Option Pricing Model,an Increase in Time to Expiration

question 39

Multiple Choice

In the Black-Scholes option pricing model,an increase in time to expiration (T) will cause

• A) An increase in call value and an increase in put value
• B) An increase in call value and a decrease in put value
• C) A decrease in call value and an increase in put value
• D) A decrease in call value and a decrease in put value
• E) An increase in call value and an increase or decrease in put value

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Definitions:

Divergence

The evolution of different forms or species from a common ancestor, involving the accumulation of genetic differences that can lead to the formation of new species.

Reproductive Isolation

A set of conditions, mechanisms, or behaviors that prevent members of different species or populations from mating and producing fertile offspring.

Reinforcement

A process in speciation where natural selection increases the divergence between two populations of species, leading to the development of reproductive barriers.

Universalism Versus Particularism

A cultural dimension that describes the extent to which a society prefers clear rules and standards (universalism) over the flexibility to adapt norms and rules to special circumstances (particularism).