Which of the Following Statements Is INCORRECT

question 6

Multiple Choice

Which of the following statements is INCORRECT?

• A) The hedge ratio is the number of shares of the stock to hold for each written option to form the perfect hedge.
• B) The hedge ratio lies between 0 and 1 in the case of a call option.
• C) The hedge ratio lies between 0 and -1 in the case of a put option.
• D) The hedge ratio may be defined as the ratio of the change in option price to change in stock price.
• E) Pseudo-probabilities are useful for computing the hedge ratio.

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Definitions:

High Standards

The principles or criteria that must be met to achieve excellence or superior quality in a task, product, or behavior.

Stockholders

Individuals or entities that own shares in a corporation, giving them a stake in the company's performance and decisions.

Reputation for Quality

The perception held by customers and the wider public that a company consistently delivers products or services of high quality.

Computer-Based Technology

Technology that relies on computers for operation, encompassing both hardware and software applications.