The Longer the Time to Expiration, the Lower the Option

question 117

True/False

The longer the time to expiration, the lower the option time premium tends to be.

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Definitions:

Kinked-Demand Model

A model in oligopoly markets where firms face a demand curve with a kink at the current price, illustrating non-responsive demand to price changes by one firm if others do not follow.

Cartel

An agreement among competing firms to control prices or exclude entry of a new competitor in a market.

Economic Efficiency

A state where resources are allocated in the most beneficial way for society, maximizing productivity while minimizing waste and inefficiency.

Brand Loyalty

The tendency of consumers to continuously purchase products from the same brand instead of switching to competitors.