If You Take a Futures Position in a Stock Index

question 80

Multiple Choice

If you take a futures position in a stock index futures to offset the risk of a market decline that affects your investment portfolio, you are

• A) Doing am arbitrage trade
• B) Doing a reserve trade
• C) Creating a cross-hedge
• D) Doing a close-out
• E) Creating a "triple witch"

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Definitions:

Annual Consumption

The total amount of goods and services used or consumed by individuals or groups within a one-year period.

Disposable Income

Disposable income refers to the amount of money that households have available for spending and saving after income taxes have been accounted for.

Aggregate Household Wealth

The total net worth held by the households in an economy, combining all assets minus liabilities.

Durable Goods

Things that last at least a year or two.