What Happens When the Volatility Is Zero in the Black-Scholes-Merton

question 34

Multiple Choice

What happens when the volatility is zero in the Black-Scholes-Merton model?

• A)the option price converges to either zero or the lower bound
• B)the option price converges to the intrinsic value
• C)the option automatically expires out of the money
• D)the gamma and delta converge
• E)none of the above

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