Question
Suppose you are holding a stock position and wish to hedge it. What forward contract would you use, a long or a short? What option
Suppose you are holding a stock position and wish to hedge it. What forward contract would you use, a long or a short? What option contract might you use? Compare the forward versus the option on the following three criteria:
(a) uncertainty of hedged position cash flow,
(b) up-front cash flow, and
(c) maturity time regret.
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When hedging a stock position whether to use a long or short forward contract and which option contract to employ depends on the specific goals and risk tolerance of the investor Lets compare the forw...
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Investment Analysis and Portfolio Management
Authors: Frank K. Reilly, Keith C. Brown
10th Edition
538482109, 1133711774, 538482389, 9780538482103, 9781133711773, 978-0538482387
