Which of the Following Causes a Volatility Smile That Is

question 1

Multiple Choice

Which of the following causes a volatility smile that is a ``frown``?

• A) There is a small probability of a large stock price decrease in one week
• B) There is a small probability of a large stock price increase in one week
• C) The outcome of a lawsuit (roughly equal chance of being favorable or unfavorable) will create a large movement up or down in one week
• D) None of the above

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Definitions:

Closed Shops

A workplace where only members of a union are hired and maintained, often established through labor union and employer agreements.

Union Shops

Workplaces where employees don't have to be union members to be hired, but must join the union within a certain period.

Union Members

Individuals who belong to a labor union, an organization that represents workers' interests in negotiations with employers regarding wages, working conditions, and benefits.

States

Politically organized territories with defined geographic boundaries, governed by their own governments and laws.