The Number of Futures Contracts That a Bank Will Need

question 16

Multiple Choice

The number of futures contracts that a bank will need in order to fully hedge the bank's overall interest rate risk exposure and protect the bank's net worth depends upon (among other factors) :

• A) The relative duration of bank assets and liabilities.
• B) The duration of the underlying security named in the futures contract.
• C) The price of the futures contract.
• D) All of the above.
• E) None of the above.

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Definitions:

Immanuel Kant

An 18th-century German philosopher known for his work in epistemology, metaphysics, and ethics, particularly his theory of knowledge and moral philosophy.

Space and Time

Fundamental physical concepts defining the universe's structure; space refers to the three-dimensional extension in which objects exist, and time to the progression of events from past through present to future.

Physical World

The material universe that exists independently of our perceptions, consisting of matter and energy and governed by physical laws.

Bertrand Russell

A British philosopher, logician, mathematician, historian, writer, social critic, and Nobel laureate, known for his work in mathematical logic and his advocacy for nuclear disarmament and social reform.