When a Party to a Contract Makes a Unilateral Mistake,the

question 44

Multiple Choice

When a party to a contract makes a unilateral mistake,the contract:

• A) generally can be rescinded by the mistaken party.
• B) is void.
• C) can be rescinded by either party.
• D) generally cannot be rescinded by the mistaken party unless the contract is unconscionable or it is proven that the nonmistaken party knew of the error.

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Definitions:

Binomial Option Model

A numerical method used in finance to price options by breaking down the option’s life into discrete time intervals.

Dynamic Hedging

A portfolio management strategy that involves continuously adjusting the hedge positions as the market conditions and prices of the underlying assets change.

Portfolio Insurance

Portfolio insurance is a strategy used by investors to hedge against market downturns by dynamically adjusting exposure to equities and typically involves the use of options or cash reserves.

Black-Scholes Model

The Black-Scholes Model provides a theoretical estimation of the price of European-style options, factoring in the stock's current price, its volatility, the option's strike price, and time to expiration, along with risk-free interest rates.