Which of the Following Is NOT Valid About the Time

question 9

Multiple Choice

Which of the following is NOT valid about the time decay of European put and call options with the same strike and maturity?

• A) The time decay is measured in dollars per unit time.
• B) The call decays at the same rate as the put.
• C) The call decays faster than the put.
• D) The difference between the time decay of decay of the call and put depends on the moneyness of the options.

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Definitions:

Indifference Curve

A graph showing different bundles of goods between which a consumer is indifferent, meaning that the consumer has no preference for one bundle over another.

Opportunity Set

A collection of all possible investment options available to an investor, given their resources and risk appetite.

Reward to Variability Ratio

A financial metric used to assess the return of an investment relative to its risk.

Probability Distribution

A statistical function that describes the likelihood of occurrence of different possible outcomes for an experiment.