Asked by Jackson Boone on Apr 28, 2024
Verified
Dynamic hedging is
A) the volatility level for the stock that the option price implies.
B) the continued updating of the hedge ratio as time passes.
C) the percentage change in the stock call-option price divided by the percentage change in the stock price.
D) the sensitivity of the delta to the stock price.
Dynamic Hedging
Constant updating of hedge positions as market conditions change.
- Explain the principles behind dynamic hedging and its importance in managing option portfolios.
Verified Answer
IM
Idalia MoralesMay 02, 2024
Final Answer :
B
Explanation :
Dynamic hedging involves continuously adjusting the hedge ratio as market conditions change over time, to maintain a desired level of risk exposure.
Learning Objectives
- Explain the principles behind dynamic hedging and its importance in managing option portfolios.