Hedging Equity Portfolio with Derivatives

Very Easy Risk Management Derivatives In Risk Management

XYZ Asset Management is advising a client on how to hedge against potential losses in their equity portfolio due to anticipated market volatility. The advisor suggests using derivatives to mitigate risk.

Which of the following derivatives would be most appropriate for the client to hedge against potential declines in the value of their equity holdings?

Buying call options on the equity index.

Selling put options on the equity index.

Buying put options on the equity index.

Hint

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