In a Delta- and Gamma-Hedged Call Option Position Over a Discrete

question 8

Multiple Choice

In a delta- and gamma-hedged call option position over a discrete time interval [t,t + $\Delta$ t]:

• A) volatility risk is eliminated
• B) small price movement risk is eliminated
• C) large price movement risk is eliminated
• D) interest rate risk is eliminated
• E) both small and large price movement risk are eliminated

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Definitions:

Three-period Moving Average

A calculation to analyze data points by creating a series of averages of three subsets of the full data set.

Time Series

A sequence of data points collected or recorded at successive time intervals, often analyzed to understand the underlying trends, patterns, or to forecast future data points.

Time Series

A sequence of data points measured at successive points in time, typically at uniform intervals, used for forecasting trends.

Smoothing Constant

A parameter used in exponential smoothing models that determines the weight given to the most recent observation in forecasting.