The models of pricing options give ________ option price no matter what the ________ and expected stock returns are.
A) a different; actual risk preferences
B) the same; expected risk preferences
C) the same; actual risk preferences
D) a different; expected risk preferences

Question

Quizplus · Accepted Answer

The models of pricing options are based on specific assumptions about the market, specifically that the market is efficient and that pricing reflects the expected return and risk of the security. Therefore, the models provide the same option price, regardless of the actual or expected risk preferences of investors. This is true as long as the assumptions of the model are met.

The Models of Pricing Options Give ________ Option Price No