Discuss (In List Form)the Risks Associated with the Following Investment

question 10

Essay

Discuss (in list form)the risks associated with the following investment strategies.
a. exact matching
b. immunization
c. portfolio insurance
d. timing
e. sector selection
f. selecting mispriced options using the Black-Scholes formula

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Definitions:

Contribution Margins

The amount remaining from sales revenue after all variable expenses have been deducted, indicating how much contributes to covering fixed costs and generating profit.

Cost-volume-profit Chart

A cost-volume-profit chart is a visual representation that shows how changes in a company's sales volume will affect its costs and profitability, facilitating breakeven and profit-target analysis.

Total Cost Line

A graphical representation showing the total cost associated with producing various levels of output.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the proportion of fixed costs in a company's cost structure.