If the Volatility Implied from an At-The-Money Put Stock Option

question 7

Multiple Choice

If the volatility implied from an at-the-money put stock option were used to price other put options on the stock,which of the following would be true?

• A) Out-of-the money and in-the-money prices would be too high
• B) Out-of-the money and in-the-money prices would be too low
• C) Out-of-the-money option prices would be too high and in-the-money option prices would be too low
• D) Out-of-the-money option prices would be too low and in-the-money option prices would be too high

---

Definitions:

Visual Memory

The ability to remember and recall information that has been seen visually.

Vocalizations

The production of sounds by an organism, often as a form of communication among members of a species.

Prelinguistic

Referring to vocalizations made by the infant before the development of language. (In language, words symbolize objects and events.)

Paralinguistic

Refers to the non-verbal elements in speech communication, such as tone of voice, loudness, tempo, and pitch, which can modify meaning and convey emotion.