The Hedge Ratio

question 32

Multiple Choice

The hedge ratio

• A)Is the size of the long (short) position the investor must have in the underlying asset per option the investor must write (buy) to have a risk-free offsetting investment that will result in the investor perfectly hedging the option.
• C)Is related to the number of options that an investor can write without unlimited loss while holding a certain amount of the underlying asset.
• D)All of the above

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Definitions:

Individualism

An orientation in social philosophy that emphasizes the precedence of personal discretion over collective or governmental oversight.

Narcissism

A personality characteristic involving excessive self-love, lack of empathy for others, and a need for admiration.

Extraversion

A personality trait characterized by outgoingness, high energy, and positive emotions towards social situations.

Collectivist Culture

A cultural orientation emphasizing the needs and goals of the group over individual desires or ambitions.