In the Black-Scholes Option Pricing Model, an Increase in Exercise

question 18

Multiple Choice

In the Black-Scholes option pricing model, an increase in exercise price (X) will cause

• A) an increase in call value and an increase in put value.
• B) an increase in call value and a decrease in put value.
• C) a decrease in call value and an increase in put value.
• D) a decrease in call value and a decrease in put value.
• E) an increase in call value and an increase or decrease in put value.

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Definitions:

Flat Tract

A large piece of land with minimal to no slope, often used in agriculture or construction due to its ease of modification.

River

A large natural stream of water flowing in a channel to the sea, a lake, or another river, often a central feature in ecosystems and human civilizations.

Lower Reaches

The downstream part of a river close to its mouth where it meets a larger body of water.

Aquifer

An underground layer of water-bearing permeable rock, rock fractures or unconsolidated materials (gravel, sand, or silt) that can yield significant quantities of water.