Question #34
Reading: Reading 31 Valuation of Contingent Claims
PDF File: Reading 31 Valuation of Contingent Claims.pdf
Page: 15
Status: Unattempted
Correct Answer: A
Question
Pete Jenkins makes the following statement about options: "N(d2) is interpreted as the risk-neutral probability that a call option will expire in the money. Similarly, N(-d2) is the risk-neutral probability that a put option will expire in the money." Jenkins is most likely:
Answer Choices:
A. incorrect about the risk-neutral probability of put option expiring in the money
B. correct
C. incorrect about the risk-neutral probability of call option expiring in the money
Explanation
Jenkins is correct about both probabilities.