Which of the Following Is the Best Definition of Cross-Hedging

question 84

Multiple Choice

Which of the following is the best definition of cross-hedging?

• A) Risk that futures prices will not move directly with cash price hedged.
• B) An option that gives the owner the right, but not the obligation, to buy an asset.
• C) A contract that pays off when a credit event occurs, default by a particular company termed the reference entity, giving the buyer the right to sell corporate bonds issued by
• The reference entity at their face value.
• D) Hedging an asset with contracts written on a closely related, but not identical, asset.
• E) A financial asset that represents a claim to another financial asset.

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Definitions:

Right of Indemnification

The right of an individual or entity to be reimbursed for losses, damages, or expenses incurred as a result of fulfilling their contractual or legal obligations.

Reimbursement

The process of compensating someone for out-of-pocket expenses incurred on behalf of another party.

Strict Liability

A legal principle where an individual or entity is responsible for damages or harm caused by their actions, regardless of negligence or intent.

Inherently Dangerous

Refers to activities, substances, or products that possess potential risks or harm that cannot be entirely mitigated through reasonable care or precautions.