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Derivative contracts have many purposes within an investment environment, including protecting portfolios from falls in the share market. a. Describe a collar arrangement and discuss

Derivative contracts have many purposes within an investment environment, including protecting portfolios from falls in the share market.

a. Describe a collar arrangement and discuss the advantages and disadvantages of using a collar rather than a protective put strategy to protect the downside risk of a portfolio.

b. Draw a fully labelled diagram of the payoff diagram for the collar strategy.

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