An American Put Option on a Stock That Pays No

question 8

Multiple Choice

An American put option on a stock that pays no dividends:

• A) May be exercised early if the stock drops sharply before maturity.
• B) Is always exercised early when the the put is deep in-the-money, and the volatility of the stock rises sharply from its initial level.
• C) Is not exercised early unless the growth in the stock is lower than the rate of interest.
• D) Is never exercised early.

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Definitions:

Bullwhip Measure

A metric used to quantify the increase in variability of order sizes in the supply chain from downstream to upstream.

Bullwhip Measure

A method or metric used to quantify the degree of the bullwhip effect within a supply chain.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, used in statistics to quantify the variance from the mean.

Bullwhip Effect

The phenomenon where variations in demand at the retail level cause progressively larger fluctuations in demand at the wholesale, distributor, manufacturer, and raw material supplier levels.