Question: Kostas owns some stocks of Greek financial companies. He wants to hedge the position since the Greek economy is going through a deep recession.
a. Would buying a put option on a broad market index on the Athens Stock Exchange (ATHEX) be a good strategy to hedge his position?
b. What would happen if the recession continued and the market went further downward?
c. What would happen if the economy rebounded but the financial sector did not recover from the crisis?