All these are True or False:

1.

If we use portfolio insurance on a stock, then you buy when the stock goes up, and sell the stock when it goes down.

2.

In binomial option valuation, we need to know the expected return on the stock (that is, we need the probability of the stock increasing or decreasing).

3.

We can allow for stochastic (randomly varying over time) volatility inour complete markets method of option pricing so long as that volatility is tradeable in the market.

4.

When we value options, you may say that we are really valuing a portfolio of stocks and bonds that exactly replicate the payoff of the option.

5.

When we value options, you may say that we are really valuing a portfolio of stock and options that exactly replicate the payoff of a risk-free bond.