What option pricing biases are likely to be observed when(a) both tails of the stock price distribution are thinner than those of the log normal distribution?(b) the right tail is thinner, and the left tail is fatter, than that of a log normal distribution?

When buying a put option, the buyer will let the option expire in the event of an increase in volatility and will make money when there is a decrease in volatility. Even in the absence of actual price movement, volatility increases the value of calls and puts. Volatility is crucial because of this.

Which pricing strategy is favored for option pricing?

The most well-known method for pricing options is probably the Black-Scholes model. By dividing the stock price by the cumulative standard normal probability distribution function, the model's formula is created.

Which three characteristics have the biggest impact on an issue's price volatility?

Interest rates, the coupon, and the issue's maturity are the three key variables that influence a bond's price volatility.

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