According to option pricing theory, a higher volatility would cause the call option premium to
A) increase
B) decrease
C) remain the same
D) any of the above can occur

Question

Quizplus · Accepted Answer

Higher volatility increases the potential for the underlying asset to move significantly, which raises the potential for the option to be in-the-money, thus increasing the call option premium.

According to Option Pricing Theory, a Higher Volatility Would Cause