Question: Option Pricing Risks, Commodity Risks, and Foreign Exchange Risks Option traders face risks that academics have divided into three categories. Define the three, commenting on

Option Pricing Risks, Commodity Risks, and Foreign Exchange Risks Option traders face risks that academics have divided into three categories. Define the three, commenting on which one is most evident in behavioral finance. What is the behavioral explanation for the popularity of covered call writing? What makes protective puts different from a behavioral finance standpoint? What did Roll contend about the pricing of commodities relative to the underlying fundamentals? Comment on how well the forward foreign exchange discount is as a predictor of future movements in the spot rate. Anything highly unusual? State how Froot & Frankel suggest exploiting exchange rate changes.

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