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International Certificate in Banking Risk and Regulation (ICBRR) Questions 146–150 (page: 31)

To hedge equity exposure without buying or selling shares of stock or otherwise rebalancing the portfolio, a risk manager could initiate

An options trader for a large institutional investor takes a long equity option position.
Which of the following risks need to be considered when taking this position?

I) All the risks of underlying equities
II) Perceived volatility changes
III) Future dividends yields
IV) Risk-free interest rates

Which one of the following four exercise features is typical for the most exchange-traded equity options?

The exercise for an American type option prior to expiration day is virtually certain in the following case:

Over a long period of time DeltaBank has amassed a large equity option position.
Which of the following risks should be considered in this transaction?

I) Counterparty risk on long OTC option positions
II) Counterparty risk on short OTC option positions
III) Counterparty risk on long exchange-traded option positions
IV) Counterparty risk on short exchange-traded option positions