Which of the following contains calcium hydroxide? 

lime water 

The correct answer is option 2. lime water.

Lime water is a solution of calcium hydroxide (Ca(OH)₂) in water. When calcium oxide (lime, CaO) reacts with water, it forms calcium hydroxide. The chemical equation for this reaction is:

\[ \text{CaO} + \text{H}_2\text{O} \rightarrow \text{Ca(OH)}_2 \]

In this reaction, calcium oxide, which is often obtained from heating limestone, reacts with water to produce calcium hydroxide.

Lime water itself is a colorless liquid, and it is used in various applications, including in laboratories for testing the presence of carbon dioxide. When carbon dioxide is bubbled through lime water, it forms a white precipitate of calcium carbonate:

\[ \text{Ca(OH)}_2 + \text{CO}_2 \rightarrow \text{CaCO}_3 + \text{H}_2\text{O} \]

The formation of the white precipitate is a visual indicator of the presence of carbon dioxide.

It's worth noting that lime water should be handled with care, as calcium hydroxide is an alkali and can be caustic. It has various uses, including in water treatment, agriculture, and certain laboratory applications.