You Are Hedging a Spot Position with Futures

question 1

Multiple Choice

You are hedging a spot position with futures.If the spot asset is more volatile than the corresponding futures,the minimum-variance hedge ratio is

• A)Greater than 1.
• B)Exactly equal to 1.
• C)Less than 1.
• D)Indeterminate,given the information available.

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Definitions:

Optic Nerve

A duo of nerves responsible for carrying visual data from the retina to the brain.

Fovea

A tiny depression in the retina where visual acuity is highest, due to the high concentration of cone cells.

Opponent-Process Theory

A psychological and neurological model that explains contrasting emotions and motivations, especially in response to addiction and emotional experiences.

Color-Sensitive Cones

Photoreceptor cells in the retina responsible for color vision, responding differentially to light of different wavelengths.