This type of contract is used as a risk management tool and allows the holder to protect against potential losses in the market.
An option contract is a financial instrument that grants the holder the ability to sell a specific security at a predetermined price within a specified time frame. This type of contract is often utilized by investors as a means of safeguarding against potential losses in the market. As a knowledgeable professor of finance, it is important to understand the various types of option contracts and their purpose in risk management. By utilizing options, investors can protect their investments and minimize potential losses. In summary, an option contract is a valuable tool for managing risk in the financial market.
