Xyz Company Senior Associate Interview Questions and Answers

Black-Scholes-Merton (BSM) model is a mathematical model used for pricing options.

• BSM model assumes constant risk-free rate, constant volatility, and lognormal distribution of stock prices.

• It assumes no dividends are paid during the option's life.

• The model assumes the option can only be exercised at expiration.

• The underlying stock follows a geometric Brownian motion.

• The model is used to calculate the theoretical price ...read more

Options are financial instruments that give the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price within a specific time period.

• Options can be call options or put options

• Call options give the holder the right to buy the underlying asset at a specified price within a specific time period

• Put options give the holder the right to sell the underlying asset at a specified price...read more

ATM option delta is 0.5 because it represents a 50% chance of the option expiring in-the-money.

• ATM option delta is 0.5 because it is at-the-money, meaning the option strike price is equal to the current underlying asset price.

• Delta measures the sensitivity of an option's price to changes in the underlying asset price.

• A delta of 0.5 indicates a 50% probability of the option expiring in-the-money.

• ATM options have the hig...read more