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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Answer 1

Question

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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Answer 2

Question

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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Answer 3

Question

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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Answer 4

Question

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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Answer 5

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’.

Answer 6

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’.

Answer 7

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’.

Answer 8

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Answer 9

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Answer 11

Ch. 21 - Prob. 1PS Ch. 21 - Prob. 2PS Ch. 21 - Prob. 3PS Ch. 21 - Prob. 4PS Ch. 21 - Prob. 5PS Ch. 21 - Prob. 6PS Ch. 21 - Prob. 7PS Ch. 21 - Prob. 8PS Ch. 21 - Prob. 9PS Ch. 21 - Prob. 10PS

Solution Summary: The author explains that volatility in prices results in an increase in the value of a call option.

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