Money options have largest delta in magnitude

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Questions

1. Can we claim that the at-the money options have the largest delta in magnitude?

2. What is the relation between replication portfolio approach and risk- neutral pricing approach in the option pricing models

3. True or false- risk neutral pricing method for bonds is valid only if the local expectation hypothesis holds

4. Suppose that the yield spread between a callable bond and its noncallable counterpart is 50 basis points. Can the option adjusted spread of the callable bond be higher than 50 basis points?

5. What is the relation for the option's greeks based on the black-scholes-merton PDE.

6. What are the differences between the binomial option pricing model and the black-scholes-merton model?

Reference no: EM133306351

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