- CFA Exams
- CFA Level I Exam
- Topic 7. Derivatives
- Learning Module 46. Basics of Derivative Pricing and Valuation
- Subject 8. Factors that Affect the Value of an Option
CFA Practice Question
The upside effect of volatility hurts ______.
II. puts
I. calls
II. puts
A. II only
B. both I and II
C. neither
Explanation: Volatility does not hurt either puts or calls.
User Contributed Comments 7
| User | Comment |
|---|---|
| 0is4eva | "Upside effect helps calls, does not hurt puts." "Downside effect helps puts, does not hurt calls." |
| Bibhu | Good one. |
| surob | Yeah, definitely a good one |
| jackwez | options are priced on volatility.... more of it makes them more valuable (increases the chance you will be able to execute the contract) |
| rana1970 | Volatility (weather upside or down side)never hurt call or put, rather volatility raises the values of call and put |
| rana1970 | it is actually volatility due to which we give some value to call & put, instead of hurting |
| selimkipro | thanks |