Index Put Options Are Used to Provide Protection Against the Value

question 13

Multiple Choice

Index put options are used to provide protection against the value of the portfolio falling below a certain level. Which of the following is true as the beta of the portfolio increases?

• A) The cost of hedging increases
• B) The options require a lower strike price
• C) The number of options required increases
• D) All of the above

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Definitions:

Ending Goal

The final objective or aim that one seeks to achieve at the conclusion of a process or endeavor.

Behavior Modification Programs

A systematic approach to changing behavior using principles of operant conditioning, reinforcement, and punishment.

Reinforcement

In behavioral psychology, a process that strengthens a behavior or increases the likelihood of its repetition through the application of a stimulus.

Fine-tune

Making small adjustments to something in order to achieve the best possible performance or outcome.