The Implied Volatility Skew Observed in Stock Indices Cannot Be

question 8

Multiple Choice

The implied volatility skew observed in stock indices cannot be attributed to which of the following reasons?

• A)The distribution of index returns is non-normal.
• B)The skewness of index returns is much greater than zero.
• C)The excess kurtosis of index returns is much greater than zero.
• D)There is crash risk in the index.

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Definitions:

Synergistic Benefits

Advantages gained from combining resources or efforts, resulting in a greater outcome than would be the case if working separately.

Asset Write-ups

Asset write-ups refer to the increase in the book value of assets to reflect their current market values, usually following a revaluation of assets.

Synergistic Gains

Benefits or added value resulting from the combination or cooperation of two entities, exceeding what they could achieve individually.

Tax Benefits

Financial advantages gained from various deductions, credits, or exemptions that reduce the amount of income subject to tax.