Hedging by Buying an Option

question 2

Multiple Choice

Hedging by buying an option

• A)limits gains.
• B)limits losses.
• C)limits gains and losses.
• D)has no limit on option premiums.

---

Definitions:

Significance Level

The probability threshold below which the null hypothesis is rejected in a statistical test, commonly denoted by alpha (α).

Sample Data

A subset of a population used to estimate or make inferences about the entire population.

Significance Level

The probability of rejecting the null hypothesis in a statistical test when it is actually true, commonly set thresholds include 0.05, 0.01.

Random Sample

A subset of individuals chosen from a larger set, where each individual has an equal chance of being selected.