The Safest Way to Hedge a Bond Asset with Options

question 1

Multiple Choice

The safest way to hedge a bond asset with options is to

• A)purchase a call option on the bond.
• B)write a call option on the bond.
• C)purchase a put option on the bond.
• D)write a put option on the bond.

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Definitions:

Feedback Element

A component in a control system that provides real-time input based on the output, helping to adjust the system's behavior.

Deadband

A range within which an input signal can vary without initiating a response or change in the output, used to prevent frequent or unnecessary adjustments.