QUESTION: 77 Exam Topic: 1 Volume A

A risk manager is analyzing a call option on the GBP with a vega of 0.02.
When the perceived future volatility increases by 1%, the call option

Increases in value by 0.02.
Increases in value by 2.
Decreases in value by 0.02.
Decreases in value by 2.

Answer(s): A

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QUESTION: 78 Exam Topic: 1 Volume A

Typically, which one of the following four option risk measures will be used to determine the number of options to use to hedge the underlying position?

Vega
Rho
Delta
Theta

Answer(s): C

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QUESTION: 79 Exam Topic: 1 Volume A

Which one of the following four statements correctly defines chooser options?

The owner of these options decides if the option is a call or put option only when a predetermined date is reached.
These options represent a variation of the plain vanilla option where the underlying asset is a basket of currencies.
These options pay an amount equal to the power of the value of the underlying asset above the strike price.
These options give the holder the right to exchange one asset for another.

Answer(s): A

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QUESTION: 80 Exam Topic: 1 Volume A

Which one of the following four exotic option types has another option as its underlying asset, and as a result of its construction is generally believed to be very difficult to model?

Spread options
Chooser options
Binary options
Compound options

Answer(s): D

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QUESTION: 77 Exam Topic: 1 Volume A

QUESTION: 78 Exam Topic: 1 Volume A

QUESTION: 79 Exam Topic: 1 Volume A

QUESTION: 80 Exam Topic: 1 Volume A