If Changes in Spot and Futures Prices Are Perfectly Correlated $+ 1$

question 6

Multiple Choice

If changes in spot and futures prices are perfectly correlated over the horizon of a hedge,then

• A)The minimum variance hedge ratio is \(+ 1\)
• )
• B)The variance of cash flows from a hedged position under the minimum-variance hedge ratio is zero.
• C)The net cash flow at maturity of the hedge is zero.
• D)The standard deviation of spot price changes must equal the standard deviation of futures price changes.