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A hedge fund intern is analyzing different techniques to quantify volatility as part of the company's risk analytics framework for option portfolios. The intern examines the key attributes of three specific measures: historical volatility, implied volatility, and the variance rate. What is the correct conclusion the analyst should reach based on their evaluation?
A
Implied volatility needs to be annualized by scaling between time horizons, while the variance rate is an annual value by construction.
B
The variance rate scales with the square root of the holding period, while historical volatility scales linearly with time.
C
Historical volatility is less than implied volatility, while the variance rate is greater than historical volatility.
D
Historical volatility is calculated by taking the standard deviation of returns, while implied volatility is the volatility that equates the option price produced by the Black-Scholes-Merton model with the observed market price of the option.