How Frequently Should You Consider Rebalancing the Options Hedge on a Large

question 22

Multiple Choice

How frequently should you consider rebalancing the options hedge on a large equity portfolio if you wish to maintain an effective hedge?

• A)weekly
• B)annually
• C)just prior to the fiscal year end
• D)at option expiration
• E)only when the options are in the money

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Definitions:

Production Function

The relationship between the quantity of inputs a firm uses and the quantity of output it produces.

Inputs

The resources, such as labor, materials, and capital, that are used in the production process to produce goods or services.

Output

The total amount of goods or services produced by a company, industry, or economy within a specified time period.

Total Cost Curve

A graphical representation showing the total cost of producing different levels of output in the short run or long run.