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Which of the following strategies can be used to insure against or limit downside risk? Explain or show how for each example. Buy a call
Which of the following strategies can be used to insure against or limit downside risk? Explain or show how for each example.
Buy a call option
Buy a zero coupon bond
Buy a call option and simultaneously buy a zero coupon bond with a face value equal to the options strike price
Buy a put option
Sell a put option
Buy a put and a call option (both with the same strike price)
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