Question #41
Reading: Reading 31 Valuation of Contingent Claims
PDF File: Reading 31 Valuation of Contingent Claims.pdf
Page: 18
Status: Unattempted
Correct Answer: A
Question
Which of the following statements concerning vega is most accurate? Vega is greatest when an option is:
Answer Choices:
A. far out of the money
B. far in the money
C. at the money
Explanation
When the option is at the money, changes in volatility will have the greatest effect on the
option value.