Just give the correct answer (no need to explain if you provide an accurate answer)
a. The following input is not needed to solve the option price in the Black-Scholes-Merton framework:
b. When volatility is used for____, volatility is the standard deviation of the ____ compounded return per ___.
c. If the Black–Scholes–Merton model provided an accurate description of the assumptions made by the market, the implied volatility would be ____ for all options and the volatility smile would be ___
d. Market risk is the risk NOT associated with
e. In the CDS world, the protection buyer is known as the ____ and the protection seller is known as the ____.
f. Any project that expands the firm’s set of opportunities has positive option value.
g. A 3X5 swaption is –
h.The ____________ is calculated by converting the difference between appropriate credit spread for the reference obligation and the standard rate on the CDS to a dollar present value amount.
i. An estimate of VaR(5%) on a dollar basis is interpreted as the dollar ___ in asset value that will only be exceeded ___ of the time.
Answers-
a) The correct Option is a. the asset’s risk premium
b) The correct Option is first option. option pricing, continuously, year
c) The correct Option is same, flat
d) The correct answer is last option . Tax laws.
e) The correct option is short, long
f) The correct Option is True.Any project that expands the firm’s set of opportunities has positive option value.
The statement is False. Financial models can be wrong.
g) The correct option is last option . a swaption that expires in 2 years and the underlying swap matures 3 years after that.
h) The correct option is upfront premium
i) The correct option is second Option. loss, 5%
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