Hedging in the Futures Markets Can Reduce All Risk If

question 40

Multiple Choice

Hedging in the futures markets can reduce all risk if:

• A)price movements in both the cash and futures markets are perfectly correlated.
• B)price movements in both the cash and futures markets have zero correlation.
• C)price movements in both the cash and futures markets are less than perfectly correlated.
• D)the hedge is a short hedge,but not a long hedge.
• E)the hedge is a long hedge,but not a short hedge.

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Definitions:

Sensory Deprivation

A condition in which one or more of the senses is reduced or eliminated, often used in psychological experiments or therapy.

Perceptual Abilities

The capacity to interpret and make sense of sensory information from the environment, such as visual, auditory, and tactile inputs, enabling individuals to understand and interact with the world around them.

Intellectual Abilities

The capacity to engage in abstract thinking, understanding complex ideas, reasoning, and problem-solving, often considered as part of cognitive abilities.

Signal Detection

A technique used to determine the ability to differentiate between information-bearing patterns and random patterns that distract from the information.