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.

Answer rating: 100% (QA)

When hedging a stock position whether to use a long or short forward contract and which option contract to employ depends on the specific goals and risk tolerance of the investor Lets compare the forw... View the full answer