Which of the Following Is True with Respect to Hedging

question 1

Multiple Choice

Which of the following is true with respect to hedging in the Black-Scholes-Merton model?

• A) One can hedge interest rate risk using rho.
• B) One can hedge volatility rate risk using vega.
• C) One can hedge time decay risk using theta.
• D) One can hedge small price risk using delta.
• E) One can hedge large price risk using delta.

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Definitions:

Mutations

Hereditary alterations in the genetic material that can lead to changes in the phenotype of an organism, contributing to genetic diversity.

Cell Division

The process by which a parent cell divides into two or more daughter cells, crucial for growth, reproduction, and repair in living organisms.

Tumors

Abnormal growths of tissue that can be benign (non-cancerous) or malignant (cancerous), resulting from uncontrolled cell division.

Cytomegalovirus

A common type of herpes virus that usually causes mild infections but can be serious for individuals with weakened immune systems or newborns.