Hedging the FI's Interest Rate Risk by Buying a Put

question 81

True/False

Hedging the FI's interest rate risk by buying a put option on a bond is an attractive alternative to a manager.

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Definitions:

Mediation

A process where a neutral third party assists in resolving disputes between two or more parties.

Learning

The process through which experience or practice results in a relatively permanent change in behavior or potential behavior.

Conditioning

A process of behavior modification in which a subject comes to respond in a desired manner to a previously neutral stimulus, by associating it with a stimulus that elicits an automatic response.

Classical Conditioning

A learning process that occurs when two stimuli are repeatedly paired together; a response that is at first elicited by the second stimulus is eventually elicited by the first stimulus alone.