The Vega of an Option Measures

question 70

Multiple Choice

The vega of an option measures:

• A)interest rate risk
• B)volatility risk
• C)off-balance-sheet risk
• D)price elasticity

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Definitions:

Cash Flow Growth

The increase in the amount of cash that a company generates over time.

Growing Annuity

A sequence of financial transactions increasing at a steady rate over a limited duration.

Required Rate

The minimum acceptable rate of return on an investment, considering its risk.

Cash Flow Growth

refers to the increase in the amount of cash that a company generates over a period, indicating how well a company is generating more cash from its operations.