Hedging a Spot Position with a Futures Contract on a Similar

question 38

Multiple Choice

Hedging a spot position with a futures contract on a similar, but not identical, commodity is a ________ hedge.

• A) Cross
• B) Open
• C) Commodity
• D) Market
• E) Program

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Definitions:

Variation

The extent to which data points in a statistical distribution or dataset diverge from the average or mean.

Degrees of Freedom

The number of independent values or quantities that can freely vary in an analysis without violating any given constraints.

Factorial Experiment

An experimental design technique in which the effects of two or more variables are studied at once by changing them together, rather than one at a time.

Interaction

A situation in statistical analyses where the effect of one variable on an outcome depends on the level of another variable.