The Risk That Arises Because the Value of a Futures

question 26

Multiple Choice

The risk that arises because the value of a futures contract will not be perfectly correlated with the firm's exposure is called ________.

• A) commodity price risk
• B) basis risk
• C) liquidity risk
• D) speculation risk

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Definitions:

Teamwork

The collaborative effort of a group to achieve a common goal effectively by working together cohesively.

Self-fulfilling Prophecy

A prediction that directly or indirectly causes itself to become true due to positive feedback between belief and behavior.

Cognitive Dissonance

The mental discomfort experienced by an individual who holds two or more contradictory beliefs, ideas, or values at the same time, leading to a motivation for change.

IQ Scores

Numerical measurements that represent an individual's level of intelligence as compared with the statistical norm.