Call prices are directly related to the stock's volatility, yet higher volatility means that the stock price

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Call prices are directly related to the stock's volatility, yet higher volatility means that the stock price can go lower. How would you resolve this apparent paradox?

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Introduction To Derivatives And Risk Management

ISBN: 9781305104969

10th Edition

Authors: Don M. Chance, Robert Brooks

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Question Posted: Apr 07, 2016 08:32 AM

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Call prices are directly related to the stock's volatility, yet higher volatility means that the stock price

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The paradox is resolved by recalling that if the option expires outofthemoney it d...View the full answer

Introduction To Derivatives And Risk Management

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