Identify and explain the appropriate hedging strategy

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Problem 1: A major bread maker is planning to purchase wheat in the near future. Identify and explain the appropriate hedging strategy.

Problem 2: An investor currently owns a portfolio of stocks and expects that the stock market to fall next quarter. How does the investor hedge risk without selling the portfolio? How does the lender reduce interest rate risk?

Problem 3: What is the impact of a specific dollar amount of dividend on the binomial tree? What is (are) disadvantage(s) of the resulting tree. How do you get around this problem.

Reference no: EM132912761

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