Question 3

The optimal number of hedgning contract without tailing is always greater than number of optimal hedging contracts with tailing.

True

False

Question 6

All possible paths that a stock price can follow over the life of the option is called binominal tree.

True

False

Question 7

In a binominal tree if stock price moves 40 times, the number of end nodes will be 41.

True

False

Question 8

The delta is number of stocks in a perfectly hedged portfolio of stocks

True

False

Question 9

Risk neutral evaluation assumes that the expected return on the underlying asset is the risk free rate and discounts at the risk free rate

True

False

Question 10

In binomial option pricing using a risk less portfolio the value of delta varies from node to node

True

False