In the Binomial Model,if an Option Has No Chance of Expiring

question 37

Multiple Choice

In the binomial model,if an option has no chance of expiring out-of-the-money,the hedge ratio will be

• A)0.5
• B)infinite
• C)1
• D)0
• E)none of the above

---

Definitions:

Monopolistically Competitive Firms

Monopolistically competitive firms operate in a market structure where many companies sell products that are similar but not identical, leading to some degree of market power.

Long-Run Equilibrium

The intersection of the AD and LRAS curves, when wages and prices have adjusted to their final equilibrium levels.

Marginal Cost

The cost associated with producing one additional unit of a product, important for making efficient production and pricing decisions.

Monopolistic Competition

A market structure where many firms sell products that are similar but not identical, leading to competition based on product differentiation.