(a) When would individual equity securities be a better choice over ETFs for a risk adverse investor? Explain your reasoning in full and provide justification for your decision-making using criteria learned in the module.

(b) Critically examine the benefits and risks faced by investors in international options and give examples of how these risks are currently present in markets affected by Brexit and Covid-19.

A. Individual equity securities will be a better choice for exchange traded fund for the risk averse investor when the risk premium is very low into the market and the risk averse investor believes that he can make a higher rate of return by taking minimal risk and maximizing the rate of return in the market so when there will be a very high rate of return which will be offered for normal raised and it will be helping the investor in order to maximize his overall rate of return and it will be better for investing into individual security rather than exchange traded fund which is replicating the market index.

The individual should be trying to invest into the equity securities on the individual basis as the individual will believe that the standard deviation as well as the systematic risk associated with the portfolio will be lower and hence we will not be trying to invest into the market and rather he will be trying to invest into particular asset in order to maximize the rate of return so there will be a higher rate of return which will be offered for a lower risk averse individual will be trying to take a very low amount of in respect of maximization of rate of return, so it can be said that the individual can only invest into the individual securities over the exchange traded fund if the individual securities are often with very high rate of return for a lower risk.

B. Benefits associated by the the investment into International options are related to higher amount of diversification as well as it will also offer with the option for the investor to exercise contract and it will also offer the investors an opportunity for hedging of the risk internationally and getting a better risk management in respect to the exchange rate risk as well.

The investors will also try to lower the risk associated with investment in various different International event by taking options which will be protecting against the adverse movements of markets.

There are disadvantages related to price of international options as they are generally higher and there will be risk associated with not understanding with the International movement of securities because the individual does not have adequate exposure into the international scenarios and there will also be a risk associated with higher cost because those options are more likely to be worthless if they are expiring out of the money.