The option smirk in the Black-Scholes option model indicates that ________.
A) implied volatility changes unpredictably as the exercise price rises
B) stock prices may fall by a larger amount than the model assumes
C) stock prices evolve continuously in today's actively traded markets
D) stocks with lower exercise prices are more likely to pay dividends

Question

Quizplus · Accepted Answer

The Answer of The option smirk in the Black-Scholes option model indicates that ________.
A) implied volatility changes unpredictably as the exercise price rises
B) stock prices may fall by a larger amount than the model assumes
C) stock prices evolve continuously in today's actively traded markets
D) stocks with lower exercise prices are more likely to pay dividends

The Option Smirk in the Black-Scholes Option Model Indicates That