Which of the Following Assumptions Made in Deriving the Black-Scholes

question 2

Multiple Choice

Which of the following assumptions made in deriving the Black-Scholes formula are commonly violated in the real world?

• A) Log-returns are normally distributed.
• B) The volatility of the stock is constant.
• C) Prices evolve continuously, i.e., there are no market "gaps."
• D) All of the above.

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Definitions:

Fetoscopy

Fetoscopy is a diagnostic medical procedure that involves inserting a small scope into the uterus to observe a fetus directly for the purposes of diagnosis or therapy.

Klinefelter Syndrome

A genetic condition affecting males, characterized by an extra X chromosome, which can lead to physical, developmental, and reproductive issues.

Cystic Fibrosis

A genetic disorder that affects the respiratory and digestive systems, characterized by thick, sticky mucus production.

Fetus Position

The orientation or stance of a fetus within the uterus, which can affect the birthing process.