Options are used to insure an existing portfolio

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Reference no: EM13868322

True and False

1. Options are used to insure an existing portfolio. For example, buying a put on an asset (or portfolio) reduces the risk of loss in case of a drop in value of the asset.

2. In order to hedge the currency risk, an investor can take a position with a foreign exchange contract that offsets the currency exposure associated with the principal invested.

3. US investor investing in Europe can hedge the EURO risk by selling a US dollar future or forward.

Reference no: EM13868322

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