Which of the following is NOT an assumption underlying the Black-Scholes option-pricing model?
A) The risk-free rate is known and constant over the life of the option.
B) The probability distribution of stock prices is lognormal.
C) Investors are risk averse and will always choose the option that involves the least risk.
D) The variability of a stock's return is constant.
E) There are no transaction costs involved in trading options.
Correct Answer:
Verified
Q19: _ can execute transactions desired by investors
Q20: A speculator buys a call option for
Q21: The premium on an existing put option
Q22: When a stock index option is exercised,
Q23: Speculators may be willing to write _
Q25: A speculator purchased a call option with
Q26: Speculators purchase currency _ on currencies they
Q27: Vince, a speculator, expects interest rates to
Q28: The premium on an existing call option
Q29: European-style stock options
A)are long-term options (at least
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents