When choosing a hedging approach, you expect operational risks to be higher for:
A. A product traded on an organized exchange.
B. Dynamic replication using an exchange-tradcd product.
C. An OTC product.
D. Static replication using an exchange-traded product.
Answer:B
Operational risks tend to be higher for dynamic replication using an exchange-traded product, because the need for rebalancing increases the chance ofmishaps in implementing the strategy