Static options replication for a portfolio of American options on a stock involves
A. Finding a hedge portfolio to match daily changes
B. Finding a hedge portfolio to match values on a boundary that is certain to be reached
C. Finding a hedge portfolio to match values at one particular time
D. Constructing a hedge taking both gamma and delta into account
B
Static option replication involves finding a hedge portfolio that matches values on some boundary in {S,t} space that is certain to be crossed eventually. Once the boundary is reached the hedge must be unwound and a new hedge created.
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Kali contracts to sell Leony her car for $3,000. This contract will be fully discharged when Kali and Leony A) agree to sign a bill of sale
B) exchange the car for the $3,000. C) sign a receipt. D) shake hands and go their separate ways.
MicroMedia Inc. $1,000 par value bonds are selling for $832. Which of the following statements is TRUE?
A) The bonds must have more than six years to maturity. B) The bonds are selling at a premium to the par value. C) The coupon rate is greater than the yield to maturity. D) None of the above is true.
Tender offer repurchase is a repurchase program in which a firm ________
A) offers to repurchase a fixed number of shares, usually at a discount relative to the market value B) offers to repurchase a fixed number of shares, usually at a premium relative to the market value C) offers to repurchase a fixed number of shares, usually at par relative to the market value D) has a right to repurchase a fixed number of shares at a premium relative to the market value
What are the two ways in which the Markowitz mean-variance framework has been used by investors?
What will be an ideal response?