A riskless hedge can best be defined as
A. A situation in which aggregate risk can be reduced by derivatives transactions between two parties.
B. A hedge in which an investor buys a stock and simultaneously sells a call option on that stock and ends up with a riskless position.
C. Standardized contracts that are traded on exchanges and are "marked to market" daily, but where physical delivery of the underlying asset is virtually never taken.
D. Two parties agree to exchange obligations to make specified payment streams.
E. Simultaneously buying and selling a call option with the same exercise price.
Answer: B
You might also like to view...
Self-service retailers usually have selling space as a large proportion of total store space
Indicate whether the statement is true or false
For LANs, BNs, MANs, and WANs, the superior speeds of ________ transmission make it the preferred protocol choice
A) environmental B) asynchronous C) synchronous D) material
For installment selling, the amount of credit should not exceed the repossession value of the goods sold.
Answer the following statement true (T) or false (F)
Why is developing product costs in a large company such a time-consuming task? Why is an integrated system an advantage?