Option Prices Are Homogeneous of Degree One in Stock Price

question 23

Multiple Choice

Option prices are homogeneous of degree one in stock price and strike price. What does this imply?

• A) That if you double the stock price and the strike price the option price will remain unchanged.
• B) That if you double the stock price the option price will double.
• C) That if you double the stock price and halve the strike price the option price will double
• D) That if you double the stock price and strike price the option price will double.

---

Definitions:

Mastery

A command or grasp over a subject or skill, typically implying a high level of proficiency.

Functional Play

Functional play involves simple, repetitive activities typical in children, such as rolling a ball or stacking blocks, serving as the foundation for more complex forms of play and learning.

Piaget's First Type

refers to the sensorimotor stage in Piaget's theory of cognitive development, where infants learn about the world through their senses and actions.

Repetitive Motor Activity

The repeated performance of movements or actions, often as part of the development of motor skills in children.