When Puts Are Priced with the Binomial Model,which of the Following

question 36

Multiple Choice

When puts are priced with the binomial model,which of the following is true?

• A)the puts must be American
• B)the puts cannot be properly hedged
• C)the puts will violate put-call parity
• D)the hedge ratio is one throughout the tree
• E)none of the above

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Definitions:

Scanlon Plan

A participative management method that focuses on productivity improvement and labor cost savings, with financial benefits shared among employees.

Labor Cost Savings

Reductions in expenses associated with employee compensation, including wages, benefits, and other payroll-related costs.

Industrial Revolution

A period of major industrialization that took place during the late 18th and early 19th centuries, leading to significant technological, socioeconomic, and cultural changes.

Interferon

A group of signaling proteins made and released by host cells in response to the presence of several pathogens, such as viruses, bacteria, parasites, and also tumor cells.