What Is the Advantage of a Futures Hedge Over an Options

question 103

Multiple Choice

What is the advantage of a futures hedge over an options hedge?

• A)The futures hedge has lower credit risk exposure.
• B)The futures hedge reduces volatility in profit gains on both sides.
• C)The futures hedge is marked to market less frequently.
• D)The futures hedge offers the least downside risk protection.
• E)The futures hedge completely offsets losses but only partly offsets gains.

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Definitions:

Chi-square

A statistical test used to determine if there is a significant association between two categorical variables.

Independent Samples

Two or more groups of observations that are collected from populations which do not overlap, important in statistical testing for comparing means.

Leptokurtic

Refers to a distribution that is more peaked than a normal distribution, indicating a higher level of outliers.

Platykurtic

Describes a statistical distribution with a lower kurtosis than the normal distribution, indicating a flatter shape.