In the Black-Scholes Option Pricing Model, an Increase in Security $\sigma$

question 47

Multiple Choice

In the Black-Scholes option pricing model, an increase in security volatility ( $\sigma$ ) 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:

Expressive Behaviors

Actions that outwardly demonstrate or convey one's emotions, thoughts, or feelings to others.

James-Lange Theory

A theory of emotion that posits that physiological arousal precedes the experience of emotion, suggesting emotions are the result of perceiving body changes.

Cognitive Appraisal

The process by which an individual evaluates and interprets a situation, determining its significance for their well-being.

Two-Factor Theory

A psychological theory that proposes emotion is based on two factors: physiological arousal and cognitive label.