题目内容

When the stock price is 20 and the present value of dividends is 2, which of the following is the recommended way of constructing a tree? ( )

A. Draw a tree for an initial stock price of 20 and subtract the present value of future dividends at each node
B. Draw a tree for an initial stock price of 22 and subtract the present value of future dividends at each node
C. Draw a tree with an initial stock price of 18 and add the present value of future dividends at each node
Draw a tree with an initial stock price of 18 and add 2 at each node

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Which of the following is true when the tails of a future stock price distribution are compared with those of a lognormal distribution with the same mean and standard deviation? ( )

A. The left tail and right tail are thinner
B. The left tail is thinner and the right tail is fatter
C. The right tail is thinner and the left tail is fatter
D. Both tails are fatter

Which of the following could cause the volatility smile typically seen for foreign currency options? ( )

A. Currencies are traded in different countries at different times of the day
B. Currencies tend to have low volatilities
C. The activities of central banks causes occasional jumps in the exchange rate
D. Interest rates may be different in the two countries

Which of the following is true? ( )

A. The volatility skew for equities is much more pronounced now than it was in 1985.
B. The volatility skew for equities has a positive gradient
C. The volatility skew for equities is consistent with the Black-Scholes-Merton model.
D. The volatility skew for equities is similar to that for foreign currencies.

At the end of Thursday, the estimated volatility of asset A is 2% per day. During Friday asset A produces a return of 3%. An EWMA model with lambda equal to 0.9 is used. What is an estimate of the volatility of asset A at the end of Friday? ( )

A. 2.08%
B. 2.10%
C. 2.12%
D. 2.14%

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