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:

Placebos

Inert substances or treatments used in controlled experiments to test the efficacy of another substance or treatment.

Randomized

A method or process in which individuals or elements are selected randomly for participation in a trial or study to ensure fairness and objectivity.

Clinical Trial

A research study conducted with human volunteers to evaluate the safety and effectiveness of medical interventions.

Retrospective Study

A research approach that examines existing data or records to study outcomes that have already occurred.