The Overuse of Portfolio Insurance in the Market May Be

question 2

Multiple Choice

The overuse of portfolio insurance in the market may be dangerous because

• A)A large amount of selling may take place simultaneously
• B)A small amount of arbitraging may take place simultaneously
• C)In a down market,the insurance companies may not be able to pay for the losses
• D)All of the above

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Definitions:

Total Surplus

The sum of consumer surplus and producer surplus in a market, representing the total net benefit to society.

Equilibrium Price

The price at which the quantity of a good demanded by consumers equals the quantity supplied by producers, leading to market stability.

Equilibrium Quantity

The amount of goods or services that are bought and sold at the equilibrium price, where market demand meets market supply.

Consumer Surplus

The discrepancy between the total sum consumers are prepared and able to spend on a good or service and what they ultimately pay.