Risk Latte - Quiz#3

a) vega varies directly with time;
b) vega varies directly with square-root of time;
c) vega varies inversely with time;
d) vega varies inversely with square-root of time;

4) If the 3 month vol is 9.5,and 3 month 25 delta files are 0.25 and 3 month 25 delta r/r is 0.6 favor calls, what is the price of the 3m delta calls:

a) 9.45
b) 10.05
c) 8.95
d) 9.55;

5) When pricing a 5 yr ATM delta neutral straddles in USD-JPY option, apart from the volatility, what is the most important parameter that the trader should be careful about:

a) Spot;
b) swap points;
c) depo rates;
d) Strike;

6) The optionality (characteristics of an option) is the highest when the option is:

a) at the money;
b) 25 delta out of the money;
c) 10 delta out of the money;
d) 65 delta in the money;

7) The smile is incorporated on the volatility surface through:

a) risk-reversals;
b) butterflies;
c) swap points;
d) ATM volatility.

8) The skew is incorporated on the volatility surface through:

a) risk-reversals;
b) butterflies;
c) swap points;
d) ATM volatility.

9) If the volatility of 1m EUR/USD is 10 pct, then the volatility of 1 month EUR/HKD (USD/HKD is pegged):

a) more than 10 pct;
b) less than 10 pct;
c) at least 10 pct;
d) cannot be determined

10) The price of a window knock-out option will have the following relation with respect to the price of the corresponding vanilla and the corresponding knock-out option:

a) Lower than the vanilla but higher than the knock-out option;
b) Higher than the vanilla but lower than the knock-out option;
c) Higher than the vanilla and higher than the knock-out option;
d) Lower than both the vanilla and the knock-out option;

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