Explanation:
Static option replication is called "static" because it is intended to require little or no frequent rebalancing compared with dynamic hedging. The other statements are consistent with the concept: it can be used for many derivatives, the hedger may choose matching boundaries, and the exotic can be hedged using the replicating portfolio.
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Question 23.2 Each of the following is true about static option replication EXCEPT FOR:
A
Can be used for a wide range of derivatives
B
User has flexibility in choosing the matched boundary
C
The exotic is hedged by shorting the replicating portfolio
D
Requires frequent rebalancing