Which of the Following Statements Is Incorrect About the Historical

question 42

Multiple Choice

Which of the following statements is incorrect about the historical volatility?

• A)if used in the Black-Scholes-Merton model,it gives the current market price
• B)it is based on the volatility of the log return on the stock
• C)it requires a sample of recent returns
• D)it should be converted to an annualized volatility
• E)none of the above

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Definitions:

Time Value

The concept in finance that money available now is worth more than the same amount in the future due to its potential earning capacity.

In-The-Money

A term describing an options contract that has intrinsic value; for a call, when the underlying asset's price is above the strike price, and for a put, when it's below.

Put Option

A financial contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.

Stock Price

The current price at which a particular stock is bought or sold in the market.