A Naive Hedge Occurs When

question 91

Multiple Choice

A naive hedge occurs when

• A)an FI manager wishes to use futures or other derivative securities to hedge the entire balance sheet duration gap.
• B)a cash asset is hedged on a direct dollar-for-dollar basis with a forward or futures contract.
• C)an FI reduces its interest rate or other risk exposure to the lowest possible level by selling sufficient futures to offset the interest rate risk exposure of its whole balance sheet.
• D)an FI purchases an insurance cover to the extent of 80% of losses arising from adverse movement in asset prices.
• E)All of the options.

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Definitions:

Ethnology

The comparative study of cultures to understand human behavior and social life across different societies.

Participant Observation

A research method in anthropology and sociology where the researcher immerses themselves in the community being studied to observe and participate in their daily activities.

Ethnoarchaeology

An approach in archaeology that studies contemporary cultures to understand how human behavior is translated into archaeological remains.

Prehistory

The period of human history before the existence of written records, often studied through archaeology, anthropology, and genetic analysis.