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Which of the following is most probable? The value of a European option is generally worth more when the time to expiration is longer because:
The call options of Stock A and Stock B both expire in-the-money by $10. The inherent volatility of stock A is much higher than stock B. Comparatively, what is the most probable value to the long call for the 2 stocks?
Which of the following statements regarding a European put option is most accurate?
Which of the following statements is least accurate?
Based on the put-call parity, which of the following portfolios is risk-free?
Based on put-call-forward parity, a long put can be replicated using:
A stock is trading at $100, and it has a put option with 3 months to expiry (X=$110), last traded at $12. There is also a corresponding call option with 3 months to expiry (X=$110) that is thinly traded. An analyst wishes to calculate the no-arbitrage price of this call option using put-call parity. Assuming a risk-free rate of 6%, what is the price closest to?
Ricky Fernandes, CFA, would like to estimate the intrinsic price of a 1-year call option. The underlying stock was last traded at $180. Ricky estimates that the size of an up move to be 60%. Assuming a risk-free rate of 5%, calculate the risk-neutral pseudo probability of an up-move.
Ricky Fernandes, CFA, would like to estimate the intrinsic price of a 1-year call option with an exercise price of $160. The underlying stock was last traded at $180. Ricky estimated the following parameters for the binomial pricing model.
Assuming a risk-free rate of 5%, calculate the price of the call option using the binomial model.
Why is the language of the Learning Outcome Statements (LOS) different from the curriculum?
The LOS are protected under the CFA Institute's copyright, and we don't have permission to duplicate them verbatim. Therefore, we've rephrased the LOS and included alphabetical labels (a, b, c, …) to simplify cross-referencing with the original LOS in the curriculum when needed.
Now available for all Level I topics! Try it now!
Enter a search term (e.g. ‘LIFO reserve’), or bookmark the glossary page!