What Does the Shape of the Volatility Smile Reveal About

question 20

Multiple Choice

What does the shape of the volatility smile reveal about put options on equity?

• A) Options close-to-the-money have the lowest implied volatility
• B) Options deep-in-the-money have a relatively high implied volatility
• C) Options deep-out-of-the-money have a relatively high implied volatility
• D) All of the above

---

Definitions:

Dispositional Attribution

The tendency to attribute people's behaviors to their inherent traits, personality, or dispositions rather than to external factors.

Situational Attribution

The process of attributing behavior to external factors or circumstances beyond the control of the individual.

Cues

Signals or stimuli in the environment that are used to guide behavior and decision-making.

Barrier

Any obstacle or impediment that prevents progress or makes achieving goals more difficult.