Dynamic Hedging Is

question 53

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.
• E)A and C.

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Definitions:

Average Total Cost

Calculated by dividing total cost by the quantity of output produced; it's the cost of producing the average unit of output.

Demand Schedule

Shows how much of a given product a household would be willing to buy at different prices for a given time period.

Negative Profits

Financial losses that occur when a business's total costs exceed its total revenues, also known as net loss.

Industry Demand Curve

A graph showing the relationship between the price of a good and the total quantity demanded across the entire market.