A Call Option Can Be Used to Hedge the Risk

question 32

True/False

A call option can be used to hedge the risk of a price rise in the underlying asset.

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Definitions:

Weighted-Average Number

A calculation that takes into account the varying degrees of importance of the numbers in a dataset, giving some numbers more weight than others.

Common Shares

Shares of ownership in a corporation that entitle the shareholder to vote on corporate matters and receive dividends.

Fiscal Year

A financial year used by governments and businesses for accounting purposes, which may or may not align with the calendar year.

Convertible Bonds

Debt securities issued by a corporation that can be converted into a predetermined number of the company's equity shares.