If the Hedge Ratio Is 0

question 6

True/False

If the hedge ratio is 0.7, the number of call options necessary to offset a long position in a stock is 7.0.

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Definitions:

Absolute Advantage

The ability of a country, individual, company or region to produce a good or service at a lower cost per unit than the cost at which any other entity produces that good or service.

Comparative Advantage

The skill of an entity, whether a person, corporation, or country, to create a product or service with smaller opportunity costs than its competition.

Absolute Advantage

Absolute advantage is the ability of a country or entity to produce a good or service more efficiently than others, using fewer resources.

Trade

The exchange of goods or services between individuals, businesses, or countries.