A Naive Hedge Occurs When

question 230

Multiple Choice

A naive hedge occurs when

• A)an FI manager wishes to use futures or other derivative securities to hedge the entire balance sheet duration gap.
• B)a cash asset is hedged on a direct dollar-for-dollar basis with a forward or futures contract.
• C)an FI reduces its interest rate or other risk exposure to the lowest possible level by selling sufficient futures to offset the interest rate risk exposure of its whole balance sheet.
• D)an FI purchases an insurance cover to the extent of 80% of losses arising from adverse movement in asset prices.
• E)All of these.

---

Definitions:

Small Household Appliances

Electrical machines, typically of a size convenient for placement on countertops or tables, used for routine household tasks.

Technology Training

The process of teaching and learning about the use and implementation of various technological tools and systems, often for improving skills or efficiency.

Augmented Reality (AR)

A technology that superimposes a computer-generated image on a user's view of the real world, providing a composite view.

Internet of Things (IoT)

A network of physical objects—devices, vehicles, appliances—that uses connectivity to exchange data and automate processes.