For a Currency That Has a Futures Contract, Basis Risk

question 53

True/False

For a currency that has a futures contract, basis risk is not typically a problem as $1 is the same as any other $1.

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Definitions:

Hedge Ratio

A ratio used to reduce financial risk, representing the proportion of a position hedged to the total position size.

Hedge Ratio

The ratio used to manage risk in financial portfolios, determining the size of a position required to offset potential losses.

Dollar Exposure

The extent to which a company or investment is affected by changes in the US dollar value, particularly in foreign exchange risk.

Call Delta

A measure of the sensitivity of an option's price to a change in the price of the underlying asset.