Which of the Below Statements Is TRUE

question 49

Multiple Choice

Which of the below statements is TRUE?

• A) A put option can be used to protect against a rise in the price of the underlying instrument while maintaining the opportunity to benefit from a decline in the price of the underlying instrument.
• B) Hedging with options never differ from hedging with futures.
• C) Hedging with futures involves trading off the benefits of a favorable price movement for protection against an adverse price movement.
• D) None of these

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Definitions:

Regression Analysis

A set of statistical processes for estimating the relationships among variables.

Residual

The difference between an observed value and the value predicted by a model.

Multiple Regression Model

A statistical technique used to predict the value of a dependent variable based on the values of two or more independent variables.

Multiple Coefficient

Often refers to the multiple correlation coefficient in statistics, describing the strength and direction of a linear relationship between more than two variables.