CFA Practice Question

There are 227 practice questions for this study session.

CFA Practice Question

As expiration approaches, ______

I. RHOc tends to be 0.
II. RHOp tends to be 0.
III. THETAc will be positive.
IV. THETAp will be negative.
V. VEGAc will be positive.
VI. VEGAp will be positive.
Correct Answer: I, II, IV, V, VI

RHOc and RHOp change as time passes, with both tending toward zero as expiration approaches. Therefore I and II are correct.
The theta will be negative as the expiration date draws nearer. Therefore, IV is correct.
Vega is always positive for both calls and puts, so V and VI are correct.

User Contributed Comments 1

User Comment
moghizz RHOC is positive, RHOP is negative. RHOC is the real interest rate sensitivity. One goes down towards zero, and one goes up towards zero.Volatility is always positive for both calls and puts.
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