An Increase in the Volatility of the Underlying Asset, All

question 6

Multiple Choice

An increase in the volatility of the underlying asset, all other things held constant, will ________ the option premium.

• A) increase
• B) decrease
• C) increase or decrease
• D) Not enough information is given.

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Definitions:

Safety Cap

A protective cover designed to prevent accidental opening, often used on medication bottles.

Health Hazards

Physical, chemical, biological, or environmental factors that can cause harm or adverse health effects to individuals.

Gas Oven

A type of oven that uses natural gas or propane as its fuel source for cooking and baking.

Dry Ice

Frozen carbon dioxide used primarily as a cooling agent, which sublimates directly from a solid to a gas at temperatures below -78°C (-108°F).