Under Certain Circumstances an Options Contract May Be a Preferred

question 82

Essay

Under certain circumstances an options contract may be a preferred hedging instrument.Discuss.

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Definitions:

Comparative Advantage

Refers to the ability of a country or individual to produce a particular good or service at a lower opportunity cost than its trading partners.

Specialized

Having expertise or focusing on a specific area of knowledge, function, or skill.

Trade

The exchange of goods and services between individuals or entities, often in different countries or economies.

Production Possibilities

The various combinations of goods and services an economy can produce given its available resources and technology.