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4.6 Computer quiz

  1. The present value of an plain vanilla option can be calculated using
    1. the average terminal payoff from possible realizations of the underlying
    2. the payoff from the average possible realization of the underlying
    3. the time averaged payoff from possible realization of the underlying

  2. Approaching the expiry, the price of a vanilla call on a share without dividends
    1. rises everywhere and particularly at the money
    2. falls everywhere and particularly at the money
    3. rises out-of-the-money and falls in-the money
    4. falls out-of-the-money and rises in-the-money

  3. For the same underlying and time to expiry, a larger strike price yields
    1. a higher price for the vanilla put
    2. a higher price for the vanilla call
    3. a higher price for the cash-or-nothing call

  4. In a risk-neutral Monte-Carlo simulation with shares is
    1. the drift is equal to the long-term average growth of the stock market
    2. the drift is larger than the risk-free interest rate
    3. the drift is equal to the risk-free interest minus the dividend yield
    4. the volatility is equal to zero

  5. With a 'frown' or an inverted 'smile' in the implied volatility, the market expects
    1. a systematic fall in the underlying (bear market)
    2. a systematic rise in the underlying (bull market)
    3. expects rather stable prices for the underlying

  6. A negative time value is obtained from
    1. a finite interest rates in the case of a vanilla call option
    2. a finite dividend yield in the case of a vanilla call option
    3. the volatility in the case of a super-share

SYLLABUS  Previous: 4.5.2 Expected value of  Up: 4 EUROPEAN OPTION PAYOFF  Next: 4.7 Exercises

      
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