If Changes in Spot and Futures Prices Are Uncorrelated,then

question 18

Multiple Choice

If changes in spot and futures prices are uncorrelated,then

• A)The minimum variance hedge ratio is zero.
• B)Basis risk is zero.
• C)Hedging the spot position with futures is effective because the portfolio is well-diversified.
• D)The minimum variance hedge requires holding equal amounts of spot and futures.

---

Definitions:

Interferon

A type of protein produced by cells in response to viral infections, functioning as part of the immune response to inhibit virus spread.

Viral Infections

Diseases caused by viruses, microscopic infectious agents that can only replicate inside the cells of a host organism.

Inflammatory Response

Complex sequence of events involving chemicals and immune cells that results in the isolation and destruction of antigens and tissues near the antigens.

Vasoconstriction

The narrowing of blood vessels, which increases blood pressure by reducing the volume of space the blood occupies.