Ways the options contract is used in order to replace insurance. Introduction: Insurance and options are the different types of instruments. Insurance is a protection from the financial losses against fire, theft, or natural disaster. It is one of the popular instruments, which prevents potential loss of an individual or a company with minimal cost. An option is a derivative instrument that provides an option to hedge the risk from an asset. Hence, this is a highly sophisticated derivative instrument, which includes call option and put option.

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Chapter 23, Problem 15CRCT

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To discuss: Ways the options contract is used in order to replace insurance.

Introduction:

Insurance and options are the different types of instruments. Insurance is a protection from the financial losses against fire, theft, or natural disaster. It is one of the popular instruments, which prevents potential loss of an individual or a company with minimal cost.

An option is a derivative instrument that provides an option to hedge the risk from an asset. Hence, this is a highly sophisticated derivative instrument, which includes call option and put option.

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