Which of the Following Statements Is False

question 41

Multiple Choice

Which of the following statements is false?

• A) The option delta, Δ, has a natural interpretation: it is the change in the price of the stock given a $1 change in the price of the option.
• B) Because a leveraged position in a stock is riskier than the stock itself, this implies that call options on a positive beta stock are more risky than the underlying stock and therefore have higher returns and higher betas.
• C) Only one parameter input for the Black-Scholes formula, the volatility of the stock price, is not observable directly.
• D) Because a stock's volatility is much easier to measure (and forecast) than its expected return, the Black-Scholes formula can be very precise.

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Definitions:

Geographical Adjustments

Modifications or changes made to strategies or operations based on geographic locations or conditions.

FOB Origin Pricing

A pricing term indicating that the buyer takes responsibility for the goods and shipping costs from the seller's location, bearing all risks.

Spider Web Pricing

A pricing strategy that involves setting a low price for one product to attract customers and then raising prices once the customer engagement has been established.

Price Discrimination

A pricing strategy where a company charges different prices for the same product or service to different consumers, often based on factors like location, age, or purchasing history.