If the Hedge Ratio for a Stock Call Is 0

question 23

Multiple Choice

If the hedge ratio for a stock call is 0.60, the hedge ratio for a put with the same expiration date and exercise price as the call would be

• A) 0.60.
• B) 0.40.
• C) −0.60.
• D) −0.40.
• E) −0.17.

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Definitions:

Hydraulic Circuit

A system using hydraulic fluid under pressure to transfer force and motion between components.

Gallons Per Minute

A measure of fluid flow rate that indicates how many gallons of fluid pass a particular point in one minute.

Atmospheric Pressure

The pressure exerted by the weight of the atmosphere, typically measured at sea level.

Hydraulic Circuit

A system of interconnected components using pressurized fluid to perform work, such as moving machinery parts.