To Show How to Calculate the Hedge Ratio, We Use

question 57

Multiple Choice

To show how to calculate the hedge ratio, we use notation that includes the following: ________.

• A) S = current asset price and C = current price of a call option.
• B) Cd = intrinsic value of the call option if the asset price goes up and E = strike price of the call option.
• C) d = current price of a call option and r = a risk-free one-period interest rate .
• D) E = strike price of the call option and u = current asset price.

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Definitions:

Deferred Tax Assets

Financial assets that reduce future tax liability due to temporary differences between the ledger and tax basis of assets and liabilities, or the carryover of unused tax credits/deductions.

Income Tax Expense

The cost to a company for its taxable income, comprising current tax liabilities and deferred tax movements.

Service Revenue

Income earned from the provision of services to customers or clients.

Deferred Tax Asset

An accounting term representing taxes paid or carried forward but not yet recognized in the income statement.