Hull:Options,Futures,andOtherDerivatives,NinthEditionChapter19:TheGreekLettersMultipleChoiceTestBank:QuestionswithAnswers1.Acalloptiononastockhasadeltaof0.3.Atraderhassold1,000options.Whatpositionshouldthetradertaketohedgetheposition?A.Sell300sharesB.Buy300sharesC.Sell700sharesD.Buy700sharesAnswer:BWhenthestockpriceincreasesbyasmallamount,theoptionpriceincreasesby30%ofthisamount.Thetraderthereforehasahedgedpositionifheorshebuys300shares.Forsmallchangesthegainorlossonthestockpositionisequalandoppositetothelossorgainontheoptionposition.2.Whatdoesthetameasure?A.TherateofchangeofdeltawiththeassetpriceB.TherateofchangeoftheportfoliovaluewiththepassageoftimeC.ThesensitivityofaportfoliovaluetointerestratechangesD.NoneoftheaboveAnswer:BThetameasurestherateofchangeinthevalueofaportfoliowiththepassageoftime.3.Whatdoesgammameasure?A.TherateofchangeofdeltawiththeassetpriceB.TherateofchangeoftheportfoliovaluewiththepassageoftimeC.ThesensitivityofaportfoliovaluetointerestratechangesD.NoneoftheaboveAnswer:AGammameasuretherateofchangeofdeltawiththeassetprice.4.Whatdoesvegameasure?A.TherateofchangeofdeltawiththeassetpriceB.TherateofchangeoftheportfoliovaluewiththepassageoftimeC.ThesensitivityofaportfoliovaluetointerestratechangesD.NoneoftheaboveAnswer:DVegameasurestherateofchangeofthevalueoftheportfoliovaluewithvolatility.5.Whatdoesrhomeasure?A.TherateofchangeofdeltawiththeassetpriceB.TherateofchangeoftheportfoliovaluewiththepassageoftimeC.ThesensitivityofaportfoliovaluetointerestratechangesD.NoneoftheaboveAnswer:CRhomeasurestherateofchangeofthevalueoftheportfoliowithinterestrates.(Usuallyaparallelshiftininterestratesisconsidered.)6.Whichofthefollowingistrue?A.ThedeltaofaEuropeanputequalsminusthedeltaofaEuropeancallB.ThedeltaofaEuropeanputequalsthedeltaofaEuropeancallC.ThegammaofaEuropeanputequalsminusthegammaofaEuropeancallD.ThegammaofaEuropeanputequalsthegammaofaEuropeancallAnswer:DThedeltaofaputonanon-dividend-payingstockequalsthedeltaofthecallminusone.Thegammaofaputequalstheg...
