In Volatile Markets, Dynamic Hedging May Be Difficult to Implement

question 49

Multiple Choice

In volatile markets, dynamic hedging may be difficult to implement because

• A) prices move too quickly for effective rebalancing.
• B) as volatility increases, historical deltas are too low.
• C) price quotes may be delayed so that correct hedge ratios cannot be computed.
• D) volatile markets may cause trading halts.
• E) All of the options are correct.

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Definitions:

Sales Forecasts

Predictions regarding the amount of products or services a business expects to sell over a certain period.

Externally Supplied

Refers to goods, services, or resources that are provided by external entities or suppliers outside of the organization.

Sales Forecast

An estimation of the sales revenue a company expects to achieve in a future period under a given set of conditions.