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Free ICBRR Exam Braindumps (page: 18)

Page 17 of 87
PDF with 342 Questions

Which one of the following four statements does identify correctly the relationship between the value of an option and perceived exchange rate volatility?

  1. With increases in perceived future foreign exchange volatility, the value of all foreign exchange
  2. As the perceived future foreign exchange volatility decreases, the value of all options increases.
  3. As the perceived future foreign exchange volatility increases, the value of all options increases.
  4. Option values can only change due to the factors related to the demand for specific options

Answer(s): C



Which one of the following four mathematical option pricing models is used most widely for pricing European options?

  1. The Black model
  2. The Black-Scholes model
  3. The Garman-Kohlhagen model
  4. The Heston model

Answer(s): B



A risk manager is considering how to best quantify option price dynamics using mathematical option pricing models.
Which of the following variables would most likely serve as an input in these models?

I) Implicit parameter estimate based on observed market prices
II) Estimates of sensitivity of option prices to parameter changes
III) Theoretical option determination based on assumptions

  1. I, III
  2. II
  3. II, III
  4. I, II, III

Answer(s): D



Which one of the following four parameters is NOT a required input in the Black-Scholes model to price a foreign exchange option?

  1. Underlying exchange rates
  2. Underlying interest rates
  3. Discrete future stock prices
  4. Option exercise price

Answer(s): C






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