The Option Smirk in the Black-Scholes Option Model Indicates That

Multiple Choice

The option smirk in the Black-Scholes option model indicates that ________.

A) implied volatility changes unpredictably as the exercise price rises
B) stock prices may fall by a larger amount than the model assumes
C) stock prices evolve continuously in today's actively traded markets
D) stocks with lower exercise prices are more likely to pay dividends