Chapter 17 The Greek Letters

15) The gamma of a delta-neutral portfolio is 500. What is the impact of a jump of $3 in the price of the underlying asset?

A) A gain of $2,250

B) A loss of $2,250

C) A gain of $750

D) A loss of $750

16) Vega tends to be high for which of the following?

A) At-the money options

B) Out-of-the money options

C) In-the-money options

D) Options with a short time to maturity

17) The delta of a call option on a non-dividend-paying stock is 0.4. What is the delta of the corresponding put option?

A) -0.4

B) 0.4

C) -0.6

D) 0.6

18) A call option on a non-dividend-paying stock has a strike price of $30 and a time to maturity of six months. The risk-free rate is 4% and the volatility is 25%. The stock price is $28. What is the delta of the option?

A) N(-0.1342)

B) N(-0.1888)

C) N(-0.2034)

D) N(-0.2241)

19) Which of the following is NOT a letter in the Greek alphabet?

A) delta

B) rho

C) vega

D) gamma

20) When the interest rate is zero which of the following is true for a delta-neutral portfolio with a positive gamma?

A) As gamma increases theta becomes more positive

B) As gamma decreases theta declines

C) Theta is zero

D) As gamma increases theta becomes more negative