What Does the Black and Scholes Option Pricing Model Mean

question 15

Multiple Choice

What does the Black and Scholes Option Pricing model mean by "markets are frictionless"?

• A)There are no taxes
• B)There are no transactions costs
• C)All securities are infinitely divisible
• D)All market participants may borrow or lend at the known constant riskless rate of interest
• E)All of the above are correct

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Definitions:

Land

The solid part of the earth's surface including the ground and all natural resources and features.

Zoning Restrictions

Zoning restrictions regulate the use and development of real estate in specified areas, often determining the type of buildings that can be constructed.

Variance

A permission granted by a government or regulatory body to deviate from the strict enforcement of zoning laws or regulations.

Nonconforming Use

involves the utilization of land or buildings that does not comply with current zoning laws, but is allowed because the use was established legally before the zoning laws were enacted.