- CFA Exams
- CFA Level I Exam
- Topic 7. Derivatives
- Learning Module 32. Valuation of Contingent Claims
- Subject 6. Option Greeks and Implied Volatility
CFA Practice Question
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.
Correct Answer: II only
VEGAc and VEGAp are identical and always positive.
For a call option, rho (RHOc) is always positive. For a put option, rho (RHOp ) is always negative.
VEGAc and VEGAp are identical and always positive.
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. |