An Equity Portfolio Manager Can Neutralize the Risk of Falling

question 57

Multiple Choice

An equity portfolio manager can neutralize the risk of falling stock prices by entering into a hedge position where the payoffs are

• A) not correlated with the existing exposure.
• B) positively correlated with the existing exposure.
• C) negatively correlated with the existing exposure.
• D) at breakeven with the existing exposure.
• E) imperfectly correlated with the existing exposure.

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Definitions:

Affective Commitment

An employee's emotional attachment to, identification with, and involvement in an organization.

Continuance Commitment

The degree to which employees feel committed to their organizations due to the costs associated with leaving.

Continuance Commitment

An employee's psychological attachment to an organization based on the costs that they perceive associated with leaving it.

Normative Commitment

The feeling of obligation an individual has to continue in an organization because of their personal values, ethics, or commitments.