One Way of Reducing the Cost of Hedging with Options

question 58

Multiple Choice

One way of reducing the cost of hedging with options is to:

• A) use a collar.
• B) use a range forward.
• C) go on the Chicago Board of Trade.
• D) A and B.

---

Definitions:

Marginal Utility

The extra satisfaction or usefulness gained from consuming or acquiring one more unit of a product or service.

Ties

Articles of clothing, typically narrow strips of fabric worn around the neck under the collar, primarily by men for decorative purposes.

Shirts

Pieces of clothing for the upper body, typically with sleeves and a front opening, made for both genders.

Budget Constraint

The limitation on the consumption bundles that a consumer can afford given their income and the prices of goods and services.