Can anyone explain to me how answer C is not the correct answer? Is this statement true or false: “An option hedge would be used when implied volatility is low”
True option hedge would be cheap because implied vol is low. If vol is expensive use dynamic hedging via futures which do not price via vol.
ok, i kind of get it - you want to buy the options when they are cheap, so when volatility rises you will be better off is that correct?
the statement is true An option hedge would be used when implied volatility is low
dynamic will be used when implied volatility is high and real volatility is low
mcap11 Wrote: ------------------------------------------------------- > ok, i kind of get it - you want to buy the > options when they are cheap, so when volatility > rises you will be better off > > is that correct? winner winner, chicken dinner.
This whole chapter is beyond irrelevant anyway. There are no “two bond hedges” anymore. Entire market is done via swaptions.
not one Equity question on the Schweser Mock, that was odd Also, Stalla claims that a bank essay has NEVER been asked in the past, and Schweser puts one on their mock… thanks for the help guys
mcap11 Wrote: ------------------------------------------------------- > not one Equity question on the Schweser Mock, that > was odd > > Also, Stalla claims that a bank essay has NEVER > been asked in the past, and Schweser puts one on > their mock… > > thanks for the help guys There was an equity vignette. Discussed a portfolio manager of a small cap fund. Equity is supposedly only 5% of exam.