Financial Management - Study Mode

[#471] Type of options in which buyer of options has call on 200 shares in stock is classified as
Correct Answer

(A) call option

Explanation

Solution: Type of options in which buyer of options has call on 200 shares in stock is classified as call option. Call options are agreements that give the option buyer the right, but not the obligation, to buy a stock, bond, commodity or other instrument at a specified price within a specific time period.

[#472] Movement of price or rise or fall of prices of options is classified as
Correct Answer

(D) binomial lattice

Explanation

Solution: Movement of price or rise or fall of prices of options is classified as binomial lattice. The binomial options pricing model provides a generalizable numerical method for the valuation of options. Essentially, the model uses a "discrete-time" model of the varying price over time of the underlying financial instrument, addressing cases where the closed-form Black–Scholes formula is wanting.

[#473] Variability of stock price, option term to maturity and risk free rate are dependents of
Correct Answer

(A) price of an option

Explanation

Solution: Variability of stock price, option term to maturity and risk free rate are dependents of price of an option. Variability is the extent to which data points in a statistical distribution or data set diverge from the average value as well as the extent to which these data points differ from each other.

[#474] Value of option which is considered as its worth as soon as it is expired is classified as
Correct Answer

(D) exercise value

Explanation

Solution: Value of option which is considered as its worth as soon as it is expired is classified as exercise value. The profit that an option holder would receive by exercising an in-the-money option. That is, the exercise value of an option is how much the strike price is below the underlying asset (for a call) or above the underlying asset (for a put).

[#475] Current value of stock including in portfolio is subtracted from present value of portfolio to calculate
Correct Answer

(C) current option price

Explanation

Solution: Current value of stock including in portfolio is subtracted from present value of portfolio to calculate current option price.