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Basic Question 0 of 5
For a call option, ______
II. theta is generally negative.
III. vega is always negative.
I. rho is always negative.
II. theta is generally negative.
III. vega is always negative.
User Contributed Comments 2
| User | Comment |
|---|---|
| ramdabom | I thought Theta relates to time. How can it be negative? |
| cowboy | @ramdabom: yes it relates to time. as time goes by an option decreases in value. |
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Martin Rockenfeldt
Learning Outcome Statements
explain the assumptions and justify the selection of the two-stage DDM, the H-model, the three-stage DDM, or spreadsheet modeling to value a company's common shares;
describe terminal value and explain alternative approaches to determining the terminal value in a DDM;
calculate and interpret the value of common shares using the two-stage DDM, the H-model, and the three-stage DDM;
explain the use of spreadsheet modeling to forecast dividends and to value common shares;
evaluate whether a stock is overvalued, fairly valued, or undervalued by the market based on a DDM estimate of value.
CFA® 2025 Level II Curriculum, Volume 3, Module 21.