Q1 - Without considering the fact that the money deposited in the margin account earns interest, a hedger might take a wrong hedging position which turns it into a speculative one.

A - True

B - False

Q2 - The exotic option with payoff max[average(St)-K, 0] , where t belongs in time interval [0, T], is an Asian option. Granting Asian options as executive compensation can better align the interests of executives and share holders than call options, because Asian options is path dependent, which prevents executive earning management immediate before the option expiration day.

A - True

B - False

Q3 -Binomial tree can be used to price European calls and puts only.

A - True

B - False