An Equity Portfolio Manager Can Neutralize the Risk of Falling

question 19

Multiple Choice

An equity portfolio manager can neutralize the risk of falling stock prices by entering into a hedge position where the payoffs are

• A) Not correlated with the existing exposure.
• B) Positively correlated with the existing exposure.
• C) Negatively correlated with the existing exposure.
• D) Any of the above.
• E) None of the above.

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Definitions:

Skinner

B.F. Skinner, an American psychologist known for his pioneering work in behaviorism and operant conditioning.

Discriminated Variable

A variable in experimental research that is manipulated or changed to determine its effects on dependent variables, differentiating it from control variables.

Stimulus

Anything that triggers a physical or behavioral change in an organism.

Neutral Prompt

A stimulus that does not inherently evoke a response prior to conditioning or learning in the context of behavioral experiments.