When Puts Are Priced with the Binomial Model,which of the Following

question 36

Multiple Choice

When puts are priced with the binomial model,which of the following is true?

• A)the puts must be American
• B)the puts cannot be properly hedged
• C)the puts will violate put-call parity
• D)the hedge ratio is one throughout the tree
• E)none of the above

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Definitions:

Debasement

The reduction in quality or the degradation of something, often referring to currency or moral values.

External Agents

Individuals or entities outside an organization that influence its operations, strategies, or changes, such as consultants or regulatory bodies.

Anticipatory Socialization

The process of learning and adapting to the norms, values, and roles of a social group or situation one expects to enter in the future.

Reliable Job Behaviour

Consistent and predictable actions performed by an employee that fulfill job responsibilities and organizational expectations.