Which of the Following Is True

question 8

Multiple Choice

Which of the following is true?

• A) Volatility smile for European puts is the same as for European calls
• B) Volatility smile for European puts is the same as for American puts
• C) Volatility smile for European calls is the same as for American calls
• D) Volatility smile for American puts is the same as for American calls

---

Definitions:

Chance

The occurrence and development of events in the absence of any obvious intention or cause.

Controlled Error

Error that is managed or regulated within an experiment to ensure it does not affect the validity of the results.

Critical Value

A point on the scale of the test statistic beyond which we reject the null hypothesis; it defines the boundary for the region of rejection.

Power

The probability that a statistical test will correctly reject a false null hypothesis, effectively detecting an actual effect.