Which one of the following best describes the graphical relationship between stock prices and option prices?
A)linearity
B)concavity
C)convexity
D)hyperbolic
E)exponential

Question

Quizplus · Accepted Answer

The graphical relationship between stock prices and option prices is convex, meaning that as stock prices increase, the increase in the option price becomes larger. However, as stock prices decrease, the decrease in the option price becomes smaller. This is known as the convexity of options.

Which One of the Following Best Describes the Graphical Relationship