Other Things Equal, the Price of an Option Goes Up

question 1

True/False

Other things equal, the price of an option goes up as the volatility of the option decreases.

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Definitions:

Leasing

A contractual arrangement where one party (the lessor) grants another party (the lessee) the right to use an asset for a specified period in return for regular payments.

Wages Forgone

The potential earnings that are lost or given up by choosing one alternative over another, often considered in decisions about education or training.

Implicit Costs

The opportunity costs of using resources owned by the firm for its own use, rather than selling them for a profit elsewhere.

Economic Costs

The total value of all resources used in the production of goods or services, including both explicit and implicit costs.