Ross et al.: Fundamentals
of Corporate Finance, Sixth
Edition, Alternate Edition
VIII. Topics in Corporate
Finance
- Risk Management: An
Introduction to Financial
Engineering
© The McGraw−Hill^825
Companies, 2002
CHAPTER 23 Risk Management: An Introduction to Financial Engineering 799
FIGURE 23.13
Risk profile
A. The unhedged risk profile
P
V
Hedged
profile
B. The hedged risk profile
P
V
Put option
payoff
Original
profile
The hedged profile is created by purchasing a put option,
thereby eliminating the downside risk.
Hedging with Options
TABLE 23.2
Sample Wall Street
JournalFutures Option
Price Quotations
Source: Reprinted by permission of The Wall Street Journal,© 2001 Dow Jones &
Company, Inc., September 5, 2001. All Rights Reserved Worldwide.