Compare the Pros and Cons of a Futures Hedge with an Option

question 112

Essay

Compare the pros and cons of a futures hedge with an option hedge.

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Definitions:

Lien Theory

A legal theory under which real estate acts as security for the repayment of a debt, with the lender holding an interest in the property until the mortgage is paid in full.

Title Theory

A legal concept in real estate that posits that the mortgage lender holds the title to the property until the mortgage is fully paid off.

Mortgagor

The borrower in a mortgage loan agreement, who pledges property to the lender as security for the loan.

Eminent Domain

The power of the government to take private property for public use, with compensation to the owner.