FIN 355 Quiz 6

FIN 355 Quiz 6
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FIN 355 Quiz 6
1. The premium on an existing call option should _______ when there is an increase in the volatility of
the stock.
2. A put option is in-the-money when _______.
3. Which of the following positions is replicated by shorting a security and writing a put?
4. Which of the following positions is replicated by shorting a security and buying a call?
5. American options _______.
6. All else equal, a cash dividend paid by stock during the life of an option _______.
7. Which of the following positions is described by a [1, -1] vector?
8. A speculator who buys a put option on a stock _______.
9. A holder of a call option will exercise it at expiration only if _______.
10. X and Y are two American call options on the same stock with the same strike price. X has six
month to expiration, while Y has three month to expiration. Which of the following must be true?
11. A risk management policy should _______.
12. Which of the following is not a component of operational risk?
13. Levers of control refer to _______.
14. Value-at-risk is a measure of _______.
15. Which of the following is not one of the steps in creating a risk policy?
16. Which of the following is not a characteristic of a risk management strategy?
17. Giving large rewards for outstanding performance may lead to _______.
18. _______ risks arise from the failure of internal systems or from errors by the people who
actually run the business.
19. Which of the following is not likely to increase operational risk?
20. All firms are exposed to _______ risks, which are specific to the industry and market within
which the company operates, and to _______ risks, which reflect general economic conditions.