The Premium on an Existing Put Option Should ____ When

question 48

Multiple Choice

The premium on an existing put option should ____ when there is a reduction in the expected short-term volatility of the stock price.

• A) be negative
• B) decline
• C) increase
• D) be unaffected
• E) A and B

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Definitions:

Reinforcement

In psychology, a process in which a behavior is strengthened or increased by a consequence that follows it.

Imitation

The action of using someone or something as a model and attempting to replicate their behavior or characteristics.

Modeling

The process of learning behavior by observing and imitating others.

Indirect Reinforcement

Reinforcement that occurs through the observation of the consequences of actions taken by others, rather than through direct personal experience.