Which of the Following Is an Example of Microhedging Asset-Side

question 84

Multiple Choice

Which of the following is an example of microhedging asset-side portfolio risk?

• A)When an FI, attempting to lock in cost of funds to protect itself against a rise in short-term interest rates, takes a short position in futures contracts on CDs.
• B)FI manager trying to pick a futures contract whose underlying deliverable asset is not matched to the asset position being hedged.
• C)When an FI hedges a cash asset on a direct dollar-for-dollar basis with a forward or futures contract.
• D)When an FI manager wants to insulate the value of the institution's bond portfolio fully against a rise in interest rates.
• E)When an FI manager wishes to use futures or other derivative securities to hedge the entire balance sheet duration gap.

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Definitions:

Single-Price Monopolist

Refers to a monopolist who charges all consumers the same price for its product, rather than price discriminating among different consumer groups.

Price Discrimination

A pricing strategy where identical or substantially similar goods or services are sold at different prices by the same provider in different markets or to different consumers.

Price Setter

A business or entity that has the ability to influence or determine the price of goods or services in the market, often due to a lack of competition.

Elasticities Differ

The principle that different goods or services have varying sensitivities to changes in price or income.