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NEW QUESTION: 1
DRAG DROP
You manage a hybrid solution for a company.
Several connections need to be created to use data from Azure expose services to Azure and use application resources in other networks.
You need to recommend configurations for the connections.
What should you recommend? To answer, drag the appropriate solutions to the correct scenarios. Each solution may be used once, more than once, or not at all. You may need to drag the split bar between panes or scroll to view content.
NOTE: Each correct selection is worth one point.
Answer:
Explanation:
NEW QUESTION: 2
If , and represent the delta, gamma and theta of any derivative whose value is V; r be the risk free rate; be the volatility and S the spot price of the underlying, which of the following equations will hold true? (Note that is the notation used for partial derivatives)
I. 202.21.q1
II. 202.21.q2
III. 202.21.q3
IV. 202.21.q4
A. I and II
B. III
C. II
D. III and IV
Answer: A
Explanation:
Explanation
This question relates to the Black Scholes PDE (partial differential equation). The Black Scholes PDE is derived by combining the results of a stock price following a Weiner process with a mathematical result known as Ito's lemma and holds true for all derivatives whose prices depend upon S, the price of the underlying and upon t, which indicates time.
The derivation of the Black Scholes PDE is beyond the scope of the PRM syllabus (and also of the author of this question), but we need to know what it is. The PDE can be written as:
202.21.q1
Substituting , this can also be written as
202.21.e
202.21.q2
Therefore the first and the second equations are correct, and the other two are wrong. Choice 'c' is the correct answer.
You should know the PDE in case there is a numerical question about it. The two ways of writing it (as I and II above in the question) express the same relationship. The BSM formula itself for valuing a vanilla European option is based upon the PDE. Most other options are also valued using the fundamental relationship expressed in the PDE.
NEW QUESTION: 3
"At the money" option will generate
A. Positive cash flows
B. Zero cash flow
C. Negative cash flows
D. None of the above
Answer: B