Select the CORRECT Statement Regarding Basis Risk Associated with Futures

question 65

Multiple Choice

Select the CORRECT statement regarding basis risk associated with futures.

• A)Basis risk can be completely eliminated.
• B)Although the basis fluctuates over time,it can be precisely predicted.
• C)The basis must be zero on the maturity date of the contract.
• D)A hedge will reduce risk as long as basis fluctuations are positive.

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Definitions:

Innate Temperament

Refers to the inherent aspects of an individual's personality, including mood, behavior, and emotional responses, that are believed to be present from birth.

Intelligence

Intelligence is the ability to learn from experience, adapt to new situations, understand complex ideas, and use various forms of reasoning to overcome obstacles.

Depression

A common mental health disorder characterized by persistent sadness, loss of interest in activities, and an inability to carry out daily tasks, often accompanied by various physical and emotional problems.

Emotionality

The quality or state of being emotional; the degree to which a person's behavior is affected by emotions.