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| 1 | |
In the Black-Scholes-Merton formula, the symbol "y" is used to designate the stock price volatility. |
| | A) | True |
| | B) | False |
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| 2 | |
The dollar impact of a change in the price of the underlying stock on the value of the stock option is measured by delta. |
| | A) | True |
| | B) | False |
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| 3 | |
Theta is frequently calibrated to relate to a one-month change in option maturity. |
| | A) | True |
| | B) | False |
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| 4 | |
In the Black-Scholes-Merton option pricing formula, T is expressed in: |
| | A) | days. |
| | B) | weeks |
| | C) | months. |
| | D) | quarters. |
| | E) | years. |
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| 5 | |
A stock has a call option delta of 0.6756. The stock price is $46 and the price of the call is $2.318. What is the stock's eta? |
| | A) | 13.41 |
| | B) | 13.54 |
| | C) | 14.23 |
| | D) | 14.48 |
| | E) | 14.80 |
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| 6 | |
A stock has a price of $63, a dividend yield of 4.2 percent, and a standard deviation of 33 percent. The risk-free rate is 4 percent. The 9-month options have a strike price of $60. The call delta is _____ and the put delta is _____. |
| | A) | 0.584; -0.225 |
| | B) | 0.597; -0.401 |
| | C) | 0.602; -0.367 |
| | D) | 0.659; -0.411 |
| | E) | 0.665; -0.348 |
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| 7 | |
Which one of the following will produce the highest put price, all else constant? Assume the options are all in-the-money. |
| | A) | $20 strike price; 50 days to option expiration |
| | B) | $20 strike price; 60 days to option expiration |
| | C) | $25 strike price; 30 days to option expiration |
| | D) | $25 strike price; 50 days to option expiration |
| | E) | $25 strike price; 60 days to option expiration |
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| 8 | |
Tyler manages a $278 million equity portfolio that has a beta of 1.22. The S&P 500 index is currently at 1,397. The option delta is .7123. How many option contracts must Tyler purchase to effectively hedge his portfolio? |
| | A) | 3,408 contracts |
| | B) | 3,619 contracts |
| | C) | 3,708 contracts |
| | D) | 3,743 contracts |
| | E) | 3,838 contracts |
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| 9 | |
You own 5,000 shares of a stock. The $45 call option on this stock has an option delta of .7994. You will need to _____ call option contracts to hedge your portfolio against price risk. |
| | A) | buy 63 |
| | B) | buy 66 |
| | C) | write 63 |
| | D) | write 66 |
| | E) | write 69 |
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| 10 | |
You own 500 shares of a stock. The $35 put has a put option delta of -0.4134. To hedge your portfolio from price risk, you need to _____ put option contracts. |
| | A) | buy 12 |
| | B) | buy 16 |
| | C) | write 12 |
| | D) | write 16 |
| | E) | write 19 |
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