A Firm Provides a Service That Benefits from Decreasing Employment

question 9

Multiple Choice

A firm provides a service that benefits from decreasing employment.This firm has a risk exposure to macro event.All other variables being equal,which of the following derivative securities is the firm most likely use to hedge its exposure?

• A) Short position in an economic futures
• B) Long position in an economic futures
• C) Short position in an interest rate futures
• D) Long position in an interest rate futures

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Definitions:

Barter

A system of exchange where goods or services are directly exchanged for other goods or services without using a medium of exchange, like money.

Directly Exchanged

A situation where goods or services are exchanged without the use of money as an intermediary.

Production Possibilities Frontier

A curve depicting all possible combinations of two goods that a society can produce within a given time period, given its technological capabilities and available resources.

Fixed Assumptions

Preset conditions or principles that are assumed to remain constant over a defined period for the purpose of analysis or modeling.