THE CURRENT STOCK PRICE OF A COMPANY IS USD 80. A RISK MANAGER IS...

13.

The current stock price of a company is USD 80. A risk manager is monitoring call and put options on the

stock with exercise prices of USD 50 and 5 days to maturity. Which of these scenarios is most likely to occur

if the stock price falls by USD 1?

Scenario

Call Value

Put Value

A

Decrease by USD 0.94

Increase by USD 0.08

B

Decrease by USD 0.94

Increase by USD 0.89

C

Decrease by USD 0.07

Increase by USD 0.89

D

Decrease by USD 0.07

Increase by USD 0.08

a.

Scenario A

b.

Scenario B

c.

Scenario C

d.

Scenario D

2015 Financial Risk Manager (FRM®) Practice Exam