NO.PZ2020021205000004
问题如下:
Explain the stop-loss strategy for hedging a short position in a call option. What is its drawback?
解释:
The stop-loss strategy involves covering the option by buying the asset that will have to be delivered as soon as the option moves in-the-money and selling when it moves out-of-the-money. It works well for some scenarios and badly for others. It is not a hedging scheme where the present value of the cost of hedging the option is always approximately equal to its theoretical price.
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