The Two Basic Types of Hedges Involving the Futures Market

question 5

True/False

The two basic types of hedges involving the futures market are long hedges and short hedges, where the words "long" and "short" refer to the maturity of the hedging instrument.For example, a long hedge might use Treasury bonds, while a short hedge might use 3-month T-bills.

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Definitions:

Security Interest

A legal claim or lien on collateral, giving a lender the right to take property to satisfy a debt if the debtor defaults.

Default

The failure to meet the legal obligations of a loan, typically by not making the required payments.

Re-Perfect

The act of renewing or restoring a security interest or claim in property to its original status or priority, generally after it has been lapsed or compromised.

Security Interest

A legal claim or lien on collateral that has been pledged, usually to secure a loan or obligation.