Question 23

As we know from the LTCM case, after every major crisis, the option implied volatility exhibits a smirk pattern. This means:

		It is the result of dynamic hedging.
		Investors in the market have higher demand to buy insurance against major market crashes going forward.
		The smirk is predicted by the option model by Scholes and Merton.
		The pattern should have been a smile instead of a smirk.

Question 24

DFA buys large block of small stocks at a discount and then sell them later at a higher price in a short time. Such trading activity can be considered as

		Speculating on private information
		Riskless trading
		Speculating on public information
		Market making