Which of the Following Indicates the Need to Place a Hedge

question 29

Multiple Choice

Which of the following indicates the need to place a hedge?

• A)The price movement in the underlying cash asset cannot be forecasted perfectly.
• B)The prices of the assets or liabilities are imperfectly correlated over time with the prices on the futures.
• C)Basis risk prevents the minimum risk of the portfolio from reaching zero.
• D)Treasury has been issuing more shorter-dated bonds to finance U.S.budget deficits.
• E)Spot bonds and futures on bonds are traded in different markets.

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Definitions:

Double Image

A visual effect in which the same object is perceived twice, either due to optical reasons or conditions affecting the viewer's perception.

Autokinetic Effect

The autokinetic effect is a visual phenomenon in which a stationary, small point of light in an otherwise dark or featureless environment appears to move.

Stationary Light

A fixed light source that does not move, used in various contexts from photography to safety signaling.

Synthesizing Process

The act of combining ideas, information, or objects into a coherent whole.