For an Option Trading in the Money,what Is the Likely

question 11

Multiple Choice

For an option trading in the money,what is the likely impact on the binomial option price as the number of binomial steps is increased?

• A) The price will fall
• B) The price will increase
• C) The price will remain constant
• D) The impact cannot be determined

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Definitions:

Supply Function

The relationship between the price of a good and the quantity supplied, typically showing a positive correlation.

Expenses

Costs incurred in the course of business operations or activities, including operational costs, salaries, and utilities.

Information Technology Costs

Expenses associated with the implementation, maintenance, and usage of information technology, including hardware, software, and services.

Capital Budget

A budget allocating funds for the acquisition or maintenance of long-term assets such as property, plants, and equipment.