Question #35
Reading: Reading 31 Valuation of Contingent Claims
PDF File: Reading 31 Valuation of Contingent Claims.pdf
Page: 15
Status: Unattempted
Correct Answer: B
Question
If we use four of the inputs into the Black-Scholes-Merton option-pricing model and solve for the asset price volatility that will make the model price equal to the market price of the option, we have found the:
Answer Choices:
A. historical volatility
B. option volatility
Explanation
The question describes the process for finding the expected volatility implied by the
market price of the option.