Question
The way to calibrate Merton's mode is to compare the model value of ___________ with the observed value from the data. a. Volatility of the
The way to calibrate Merton's mode is to compare the model value of ___________ with the observed value from the data.
| a. | Volatility of the firm's assets | |
| b. | Credit Spread | |
| c. | Recovery | |
| d. | Risk-neutral probability of default |
What model is better suited for pricing a swing option?
| a. | Binomial, because it is easiest to implement | |
| b. | Black-Scholes, because the assumptions of the model hold for swing options | |
| c. | Black-Scholes, because swing options are European options | |
| d. | Binomial, because it accommodates the possibility of early option exercise |
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Fundamentals Of Financial Management
Authors: James Van Horne, John Wachowicz
13th Revised Edition
978-0273713630, 273713639
