Quiz # 2

A call is priced at strike  K₁  and a put is priced at strike  K₂  such that the geometric average of the two strikes is the forward price, i.e.   . Then the call and put are related as:


(a)
(b)
(c)
(d)




Which of the following is an extremely useful two dimensional risk measure for an options book:


(a) delta-gamma VaR;
(b) Vega VaR;
(c) Price-vol matrix;
(d) Stack and roll computation;




If we are dealing in the arithmetic averages, then which of the following is true:


(a) An average of USD-JPY is equal to (1/Average of JPY-USD);
(b) An average of USD-JPY is equal to the average of (1/JPY-USD);
(c) An average of (1/USD-JPY) is equal to the average of (1/JPY-USD);
(d) None of the above;




“Slippage” is a trader’s term for:

(a) non-linear volatility of the barrier;
(b) liquidity;
(c) Change in gamma;
(d) None of the above;




Trader’s Rule of Thumb is also known as:


(a) Vanna-Volga pricing;
(b) Gamma-Vega pricing;
(c) Vega-Vanna-Volga (VVV) pricing;
(d) None of the above;




For an at the money (ATM) call option, which of the following is true:

(a) Vanna and Volga are approximately zero;
(b) Vanna is zero but Volga is large;
(c) Vanna is very large but Volga is zero
(d) Vanna and Volga are both large;




Negative volatility is a purely theoretical concept without any practical significance and it relates to:


(a) put-call super-symmetry
(b) put-call parity
(c) carr boundary
(d) negative probabilities in CRR tree;




If we have  N  different FRAs (forward rate agreements) for which we have volatility data, then this can provide pricing for:


(a)
(b)
(c)
(d)




Which of the following statements is true:

(a) The Omega for both barrier options and American binary options is the first
          exit time;
(b) For Barrier options the Omega is the first exit time, whereas for American
          binary Omega is the maturity;
(c) The Omega for an American binary option is the first exit time, whereas
          for a barrier option the Omega is the maturity;
(d) None of the above;




Which of the following statements is true:


(a) A Dirac delta is an impulse function;
(b) A Dirac delta is often used for gamma at expiration;
(c) A Dirac delta describes the delta of a binary option at expiration;
(d) All the above;