What Is the Reason for Executing a Gamma Hedge

question 59

Multiple Choice

What is the reason for executing a gamma hedge?

• A)the volatility can change
• B)the stock price can make a large move
• C)the stock price moves are too small for a delta hedge to work
• D)there is no true risk-free rate
• E)none of the above

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Definitions:

Entrepreneurs

Individuals who take on the risk of starting and managing a business, often bringing innovation and new products or services to the market.

Economical

Pertains to the efficient use or management of resources to avoid waste and reduce expenses.

Alternative Energy

Sources of energy that are considered environmentally friendly and sustainable, alternative to conventional fossil fuels, such as solar, wind, and hydroelectric power.

Elasticity of Demand

Investigating the degree to which demand for a good is affected by its price dynamics.