Question: 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

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.

a. True

b. False

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.

a. True

b. False

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.

a. True

b. False

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