INVESTMENTS-CONNECT PLUS ACCESS
INVESTMENTS-CONNECT PLUS ACCESS
11th Edition
ISBN: 2810022611546
Author: Bodie
Publisher: MCG
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Chapter 21, Problem 37PS
Summary Introduction

To evaluate: The fact that a higher volatility in prices results in increase of value of call option supposing that the increase in a stock price will be more than a fall in price.

Introduction:

Volatility: When the prices involved in trade activity are observed, we find that there is a change in the price from time to time-based on the market scenario. This is quite obvious. The degree of range of the changing prices can be measured with the help of a standard deviation of logarithmic returns. The value obtained can be defined as ‘volatility’.

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