The Number of Future Contracts Needed to Hedge a Unit

question 32

True/False

The number of future contracts needed to hedge a unit of the spot assets is solely a function of the variance of the spot prices.

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Definitions:

Debenture

An unsecured loan certificate issued by a company, backed by general credit rather than by specified assets.

Issuing Firm

A company that offers securities to the public or existing shareholders.

Unfunded Bond

A bond issued without a specific reserve fund set aside for its repayment, relying solely on the issuer's general creditworthiness.

Callable Bond

A callable bond is a type of bond that gives the issuer the right to pay off the bond before its scheduled maturity date at a predefined call price.