22-57 a Naive Hedge Occurs When

question 111

Multiple Choice

22-57 A naive hedge occurs when

• A)an FI manager wishes to use futures or other derivative securities to hedge the entire balance sheet duration gap.
• B)a cash asset is hedged on a direct dollar-for-dollar basis with a forward or futures contract.
• C)an FI reduces its interest rate or other risk exposure to the lowest possible level by selling sufficient futures to offset the interest rate risk exposure of its whole balance sheet.
• D)an FI purchases an insurance cover to the extent of 80% of losses arising from adverse movement in asset prices.
• E)All of the above.

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A global empire, at its zenith in the 19th and early 20th centuries, marked by its vast territories and colonies across the world.

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