Why Does the Value of an Option Increase as the Volatility

question 47

Essay

Why does the value of an option increase as the volatility of the underlying asset increases?

---

Definitions:

Material Omissions

Failures to include important information in a document or communication, which can significantly alter the understanding of the situation.

Due Diligence

The investigation or exercise of care that a reasonable business or person is expected to take before entering into an agreement or transaction with another party.

Willful Violations

Deliberate or intentional breaches of the law or regulations, often implying awareness of the illegal nature of the act.

Securities Act of 1933

United States federal law enacted to regulate the sale of securities, requiring disclosure and registration of significant information.