If Changes in Spot and Futures Prices Have a Correlation $- 1$

question 23

Multiple Choice

If changes in spot and futures prices have a correlation of $- 1$ ,then

• A)The 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 negative of the standard deviation of futures price changes.

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Definitions:

Older People

Individuals in society who are considered to be in the later stages of their life, often classified as elderly or senior citizens, typically aged 65 and older.

Functionalists

Theoretical perspective in sociology that views society as a complex system whose parts work together to promote solidarity and stability.

Inequality Work

The study or practice of addressing inequality within societies, including efforts to reduce disparities in wealth, opportunities, and treatment.

Devaluation

The reduction in value of something, which can refer to currency, assets, or social status.