Option Prices Are Homogeneous of Degree One in Stock Price

question 21

Multiple Choice

Option prices are homogeneous of degree one in stock price and strike price.What does this imply?

• A)That if you double the stock price and the strike price the option price will remain unchanged.
• B)That if you double the stock price the option price will double.
• C)That if you double the stock price and halve the strike price the option price will double
• D)That if you double the stock price and strike price the option price will double.

---

Definitions:

Social Psychology

The scientific study of how people's thoughts, feelings, and behaviors are influenced by the actual, imagined, or implied presence of others.

Fundamental Attribution Error

The tendency to overemphasize personality-based explanations for behaviors observed in others while underestimating the role of situational factors.

Personal Dispositions

Character traits or tendencies that influence how an individual responds to situations or expresses their personality.

Situational Influences

External factors or circumstances that affect an individual's decisions, behavior, and emotions.