FIN459659
Introduction to Derivatives
Spring 08
Quiz#4
You have 40 minutes to complete the quiz. The quiz is open book, open notes, open calculator. No
consulting with other students is allowed. Good luck!
1.
A share of common stock can be financially engineered by (assume that the option
strike price is identical to the current stock price):
a.
Buying a put and a call with the same strike
b.
Buying a call and selling a put with the same strike
c.
Buying a call, selling a put with the same strike and lending the present value
of the strike price.
d.
Buying a call, selling a put with the same strike and borrowing the present
value of the strike price.
2.
The only unobservable input of the BlackScholes pricing formula is:
a.
The risk free rate
b.
The annual volatility of the returns of the underlying asset
c.
The time to expiration
d.
The strike price
3.
Implied volatility is:
a.
The volatility obtained from looking at a historical price series.
b.
The volatility the makes the 52 week range exact.
c.
The number that makes the Black Scholes option price equal to the market
price.
d.
None of the above
4.
The delta of an option can be interpreted as:
a.
The volatility of the underlying
b.
The premium of an at the money option
c.
The change in the price of the underlying in response to a change in its
volatility.
d.
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 Spring '07
 Yildary
 Derivatives, Strike price, profit loss ratio

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