What does the basic Black–Scholes model assume about dividends?
AThe stock pays no dividend
BDividends are paid monthly
CDividends equal interest
DDividends are random
Answer & Solution
Correct answer: A. The stock pays no dividend
The original model assumes a non-dividend paying stock, though later extensions allow for dividends.
Keep practising Option (Finance)
Browse all Option (Finance) questions for CA Final, or explore more Strategicfinancialmanagement topics.
Related questions
When is charm especially useful for a delta-hedger?Which Greek is most important for an at-the-money straddle?Speed measures the change in gamma with respect to what?Which Greek is also known as vega convexity?Which Greek is called delta decay?Gamma is classed as which kind of Greek?Which Greek measures sensitivity to the interest rate?Which Greek measures the time decay of an option?