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:

Prenatal Development

The process of growth and development within the womb from conception to birth.

Zygotic

Pertaining to a zygote, which is a fertilized egg cell that results from the union of a female gamete (ovum) and a male gamete (sperm).

Embryonic

Pertaining to an embryo, which is an early stage in the development of organisms, prior to birth or hatching.

Fetal

Fetal refers to a stage of development that takes place in the womb, from the end of the embryonic stage until birth.