The Implied Volatility of an Option

question 4

Multiple Choice

The implied volatility of an option

• A) Is the volatility that would have to be plugged into a given option-pricing model to obtain the observed market price.
• B) Can only be calculated using the Black-Scholes model.
• C) Is the volatility implied by the underlying stock price over a given historical period.
• D) Is equal to the volatility that will actually be realized over the life of the option.

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Definitions:

Office Supplies

Consumable items and minor equipment used in an office setting, such as paper, pens, and staplers.

Petty Cash

Petty cash is a small amount of cash on hand used for covering minor, incidental expenses within a business.

Journal Entry

A record of a business transaction in the accounting journal that shows the accounts and amounts debited and credited.

Merchandise Inventory

Goods a business has acquired to sell to customers but has not yet sold.