Hedging in the Futures Markets Can Reduce All Risk If

question 40

Multiple Choice

Hedging in the futures markets can reduce all risk if:

• A) price movements in both the cash and futures markets are perfectly correlated.
• B) price movements in both the cash and futures markets have zero correlation.
• C) price movements in both the cash and futures markets are less than perfectly correlated.
• D) the hedge is a short hedge, but not a long hedge.
• E) the hedge is a long hedge, but not a short hedgE.

---

Definitions:

Dishonored

Refers to a financial instrument, such as a check or promissory note, that has not been paid upon presentation because of insufficient funds or other reasons.

Interest Revenue

Income received from investments in bonds, loans, or other interest-bearing instruments, representing the compensation for lending funds or capital.

Maturity Date

The specific date on which the principal amount of a bond, loan, or other financial instrument is scheduled to be repaid.

Issued

Referring to securities or documents that have been officially released or distributed by an entity.