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:

Social Norms

Shared guidelines or rules about acceptable behaviors within a particular group or society.

Informational Social Influence

The effect of other people's behavior on an individual's actions and beliefs, stemming from the desire to be correct in situations where the correct action or belief is uncertain.

Cognitive Dissonance Theory

A theory suggesting that individuals experience discomfort (dissonance) from holding two or more conflicting cognitions (thoughts, beliefs, or attitudes), leading them to alter behavior or attitudes to reduce discomfort.

Role

The function or position that an individual assumes or is given in a social context, which influences behavior and expectations.