Economics Derivatives Questions
Options play a crucial role in managing portfolio risk by providing investors with the ability to hedge against potential losses. By purchasing options, investors can protect their portfolio from adverse price movements in the underlying assets. Options allow investors to limit their downside risk while still benefiting from potential upside gains. Additionally, options can be used to generate income through writing (selling) options, which can help offset potential losses in the portfolio. Overall, options provide investors with flexibility and risk management tools to effectively manage their portfolio risk.