WorksheetsThe Black-Scholes-Merton Model
Total questions: 11
Worksheet time: 8mins
Who discovered the option formula?
Fischer Black alone
Myron Scholes alone
Robert C. Merton alone
All of the above
Was the paper they wrote accepted by the journals initially?
Yes.
Not sure
Got reviewed.
Rejected initially，then accepted finally.
The value of an option NOT depends on
volatility of the stock
the expected return of the stock
the excercise price
the interest rate
Which portfolio fits a hedging position?
long with stock, short with call option with a proper ratio
long with stock, long with call option with a proper ratio
long with stock, short with put option with a proper ratio
long with stock, long with put option with a proper ratio
Does the hedged position change as the stock price changes?
sometimes it does
not at all
yes
frequently it does
Which statement is correct for a hedging position?
It is risk.
The position need to be adjusted very frequently to maintain.
The position can be valid for a relatively long time.
The expected return is interest rate.
Fischer started working on the differential equation by valuing
a swap
a forward
a warrant
a future
Which one is INCORRECT for deriving the formula?
assume both of stock and option's risk can be diversified
what Black and Scholes did differed greatly from Merton.
to discount the option's expected terminal value to present.
assume that stock's beta is 0.
Which one is CORRECT when the authurs began to test the formula on real market?
the market is always right.
They can't put all the information of market intothe formula.
The formula is always right.
The market knows better than the formula.
How to gain profit from the market by applying the formula?
continuously create a close-to-riskless hedge all the time.
buy the underestimated option and sell the overestimated one
The profit from the OTC market is larger than listed option.
Now is more easier to gain profit than the 1970s.
How the formula work for you?
for research
for investment of comparing the theoritical and market price
for estimating the volatility
for fun
