When the Returns of an Option and Stock Are Perfectly

question 75

Multiple Choice

When the returns of an option and stock are perfectly correlated as in a two-state binomial option model, the hedge ratio must be equal to the ratio of ________.

• A) the range of the option outcomes to the range of the stock outcomes
• B) the range of the stock outcomes to the range of the option outcomes
• C) the standard deviation of the option returns to the standard deviation of the stock returns
• D) the standard deviation of the stock returns to the standard deviation of the option returns

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Definitions:

Medicaid Services

Government-funded programs that provide health care services to eligible low-income individuals and families.

Adult Children

Adult offspring who may still maintain a dependent relationship with their parents or are considered in relation to their parents.

Medicare

Federally funded national health insurance program in the United States for people over 65 years of age. The program is administered in two parts. Part A provides basic protection against costs of medical, surgical, and psychiatric hospital care. Part B is a voluntary medical insurance program financed in part from federal funds and in part from premiums contributed by people enrolled in the program.

Diagnosis-Related Groups

A system used to classify hospital cases into groups based on diagnosis, treatment difficulty, and resource use, to determine how much hospitals get paid.