"Basis" Risk May Arise in a Hedging Situation If

question 11

Multiple Choice

"Basis" risk may arise in a hedging situation if

• A)The expiry date of the futures contract and the date on which the hedge is unwound do not coincide.
• B)The futures contract used for hedging relates to a commodity that is somewhat different than that being hedged.
• C)A disconnect between spot and futures markets causes the failure of the convergence of futures to spot at expiry of the futures contract.
• D)All of the above.

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