Discuss the Three Methods Used to Reduce the Risk of Extreme

question 9

Essay

Discuss the three methods used to reduce the risk of extreme price moves.Ask the class to also elaborate on why simple delta hedging is inadequate to the task.

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Definitions:

Implicit Attitude

An attitude that exists outside of conscious awareness, influencing feelings and behavior unconsciously.

Explicit Attitude

Attitudes that people consciously endorse and can easily report, reflecting deliberate beliefs and feelings.

Automatic Association

The unconscious linking of two concepts or objects together in one's mind, which can influence attitudes and behavior without conscious awareness.

Implicit Attitudes

Unconscious beliefs or feelings toward objects, people, or situations that influence our responses and behavior.