Which of the Variables Affecting Option Pricing Is Not Directly

question 46

Essay

Which of the variables affecting option pricing is not directly observable
If this variable is estimated to be higher or lower than the variable actually is, how is the option valuation affected

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Definitions:

Premium

The amount by which the price of a financial instrument, such as an insurance policy or bond, exceeds its face value or nominal cost.

NAV

Net Asset Value; the total value of a fund's assets minus its liabilities, often used in the context of mutual funds.

Closed-End Mutual Funds

Investment funds with a fixed number of shares that are traded on stock exchanges, unlike open-end funds which do not have a fixed number of shares.

NAV

Net Asset Value, representing the per-share/unit price of a fund on a specific date or time.