Since the Black-Scholes-Merton Model Is Rejected When Using Historical Volatilities

question 14

Multiple Choice

Since the Black-Scholes-Merton model is rejected when using historical volatilities as input:

• A) using implied volatilities transforms the BSM theoretical model into a statistical model
• B) implied volatilities enable one to accept the BSM theoretical model
• C) one needs to use implied volatilities to delta-hedge an option
• D) one needs to use implied volatilities to vega-hedge an option
• E) one needs to use implied volatilities to both delta- and gamma-hedge an option