What Is the Reason for Decrease in the Number of Futures

question 110

Multiple Choice

What is the reason for decrease in the number of futures contract needed to hedge a cash position in case of tailing the hedge?

• A)Lower average transaction costs resulting from higher number of transactions.
• B)Interest income generated from reinvesting the cash flows generated by the futures contracts.
• C)Lack of perfect correlation between spot and futures prices.
• D)The effect of conversion factor.
• E)Hedging only a proportion of balance sheet position.

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Definitions:

Hermaphrodites

Organisms that have both male and female reproductive organs, allowing them to perform both roles in reproduction.

Intersexed

Individuals having reproductive or sexual anatomy that doesn’t fit the typical definitions of female or male, often due to genetic, hormonal, or anatomical variations.

Ambiguous Genitals

A condition present at birth where the external genitalia do not have the typical appearance of either male or female, making it difficult to assign a baby's sex.

Baby Brenda

A pseudonym used in case studies involving gender reassignment and socialization, highlighting the complexities of gender identity formation.