When the Correlation Between Two Assets Is Exactly $- 1$ ,Which of the Following Statements Is True?
A)The Hedge Ratio

question 12

Multiple Choice

When the correlation between two assets is exactly $- 1$ ,which of the following statements is true?

• A)The hedge ratio is positive.
• B)The hedge ratio is zero.
• C)The variance of the hedged position is maximized.
• D)There is no basis risk in hedging.

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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.