The Implied Standard Deviation Used in the Black-Scholes Option Pricing

question 51

Multiple Choice

The implied standard deviation used in the Black-Scholes option pricing model is:

• A)based on historical performance.
• B)a prediction of the volatility of the return on the underlying asset over the life of the option.
• C)a measure of the time decay of an option.
• D)an estimate of the future value of an option given a strike price (E).
• E)a measure of the historical intrinsic value of an option.

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Definitions:

Toxicity

The degree to which a chemical substance or a particular mixture of substances can cause harm to an organism or the environment.

Persistence

refers to the enduring existence or continual occurrence of a characteristic, condition, or effect over a long period.

Biologically Magnified

Refers to the process by which certain harmful substances, such as pesticides or heavy metals, increase in concentration as they move up the food chain.

DDT

Dichloro-diphenyl-trichloroethane, a synthetic pesticide known for its environmental persistence and effects on wildlife.