Tailing-The-Hedge Normally Requires an FI Manager to Utilize More Futures

question 20

True/False

Tailing-the-hedge normally requires an FI manager to utilize more futures contracts to hedge a cash position than are warranted by the initial analysis.

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Definitions:

Budget Line

A visual depiction of every potential mix of two items that can be bought at specific prices and under a set budget.

Expected Rate

The predicted average rate of return or growth, based on historical data or statistical analysis, applicable to investments or economic variables.

Risk-Free Asset

is an investment that is expected to deliver a guaranteed return with no risk of financial loss.

Expected Rate

Anticipated return on an investment, often considering the risk and time value of money.