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Derivatives and Risk Management, 1st Edition
book

Derivatives and Risk Management, 1st Edition

by Sundaram Janakiramanan
May 2024
Intermediate to advanced content levelIntermediate to advanced
542 pages
27h 26m
English
Pearson India
Content preview from Derivatives and Risk Management, 1st Edition
Combinations of Options: Trading Strategies 303
A reverse hedge changes all unfavourable stock outcomes into a constant hedge loss, and the gains
from favourable stock outcomes are decreased by price paid for buying the call option. A reverse hedge
will be used when an investor short-sells the stock and is concerned about an increase in the price of
the stock. If they had not bought a call, their loss would have been the total amount of increase in price.
When they buy a call, any loss from the short stock position will be oset by the gain from the call and
the maximum loss would be the call price paid. However, in case the stock price decreases, ...
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Publisher Resources

ISBN: 9781299447547Publisher Website