Dynamic Hedging Is

question 73

Multiple Choice

Dynamic hedging is

• A) the volatility level for the stock that the option price implies.
• B) the continued updating of the hedge ratio as time passes.
• C) the percentage change in the stock call-option price divided by the percentage change in the stock price.
• D) the sensitivity of the delta to the stock price.

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Definitions:

Finished Goods Inventory

Items in stock that are completed and ready for sale, representing one of the stages in the production inventory.

Variable Costing

A costing method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs, excluding fixed manufacturing overhead from product cost calculations.

Net Operating Income

The income generated from normal business operations after deducting operating expenses such as wages and cost of goods sold, excluding income from investments and other non-operational sources.

Variable Costing

An accounting method that only considers variable costs (costs that change with production levels) in product costing and decision-making.