Problem

12. Suppose you are holding a stock position, and wish to hedge it. What forward contract...

12. 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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Solutions For Problems in Chapter 1