A Naïve Hedge Is One

question 8

Multiple Choice

A naïve hedge is one

• A)in which the hedger is not fully informed.
• B)in which the hedger attempts to eliminate all of the risk of the underlying spot position.
• C)in which the hedger uses microhedges rather than macrohedges to limit risk.
• D)in which the hedger unwittingly increases the risk of the FI's position.
• E)that does not have to be reported on the FI's financial statements.

---

Definitions:

Demand

An economic principle referring to a consumer's desire and willingness to pay a price for a specific good or service.

Negotiable Instrument

A written document guaranteeing the payment of a specific amount of money, either on demand or at a set time, with transferability rights.

Time

The indefinite continued progress of existence and events in the past, present, and future regarded as a whole.

Condition

A specific requirement or stipulation that affects or determines the outcome or validity of a legal agreement.