Question

1.An options implied volatility is a measure of the variation in the option price.

2.Two portfolios A and B with the same 10-day Value-at-Risk at 95% confidence level have the same maximum loss.

Ture or False

Answer 1

1. The given statement is TRUE because implied volatility is a measure of variation of the option prices. It is used to estimate the price variation over time of options contract.

Hence, the given statement is completely TRUE as it is forward looking and it is used to measure the variation of prices of options.

2. The given statement is FALSE as Two portfolio A and B with same 10 year value at risk at 95% confidence level have different maximum loss because they will have different component of stocks in the portfolio so, their value at risk at 95% confidence level will not be having similar maximum loss.

Given statement is FALSE.