Multiple Choice
Why do traders use volatility smiles for pricing options?
A) To allow for non-lognormality of the probability distribution of future asset price
B) Because it is consistent with recent market moves
C) As a tool to reflect their views about extreme market moves
D) Because extreme market moves are always more likely than Black-Scholes-Merton assumes
Correct Answer:
Verified
Correct Answer:
Verified
Q1: Which of the following causes a volatility
Q2: The implied volatilities for strike prices of
Q3: If the volatility implied from an at-the-money
Q5: Which of the following could be a
Q6: What does the shape of the volatility
Q7: If the volatility implied from an at-the-money
Q8: Which of the following is true?<br>A) Volatility
Q9: Which of the following is true as
Q10: Which of the following is true of
Q11: Which of the following is true about