The Tailed Minimum-Variance Hedge Ratio Becomes Lower in Comparison to the Untailed

question 5

Multiple Choice

The tailed minimum-variance hedge ratio becomes lower in comparison to the untailed one when

• A)Nominal interest rates rise and hedge maturity increases.
• B)Real interest rates rise and hedge maturity decreases.
• C)Nominal Interest rates fall and hedge maturity increases.
• D)Real interest rates fall and hedge maturity decreases.

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Definitions:

Partially Disclosed

Refers to a situation where some but not all relevant information has been revealed.

Indemnification

Payment for loss or damage suffered.

Fiduciary Relationship

A relationship based on trust such as exists between an attorney and a client, an agent and a principal, a guardian and a ward, a trustee and a beneficiary, or a director and a corporation.

Principal

A person who authorizes an agent to act on her or his behalf and subject to her or his control.