An FI Has Reduced Its Interest Rate Risk Exposure to the Lowest

question 78

Multiple Choice

An FI has reduced its interest rate risk exposure to the lowest possible level by selling sufficient futures to offset the risk exposure of its whole balance sheet or cash positions in each asset and liability.The FI is involved in

• A)microhedging.
• B)selective hedging.
• C)routine hedging.
• D)overhedging.
• E)speculation.

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Definitions:

Six-figure Accuracy

A measure of precision that implies numerical values are accurate to within plus or minus one out of a hundred thousand.

Simplify

To simplify means to make something less complex or easier to understand, often by reducing it to its basic components.

Exponent Laws

Mathematical rules governing operations involving powers, such as multiplication and division of exponents.

Simplify

To make a complex problem or equation easier to understand or solve by reducing it to its basic components.