22-62 Which of the Following Is an Example of Microhedging

question 81

Multiple Choice

22-62 Which of the following is an example of microhedging asset-side portfolio risk?

• A)When an FI,attempting to lock in cost of funds to protect itself against a rise in short-term interest rates,takes a short position in futures contracts on CDs.
• B)FI manager trying to pick a futures contract whose underlying deliverable asset is not matched to the asset position being hedged.
• C)When an FI hedges a cash asset on a direct dollar-for-dollar basis with a forward or futures contract.
• D)When an FI manager wants to insulate the value of the institution's bond portfolio fully against a rise in interest rates.
• E)When an FI manager wishes to use futures or other derivative securities to hedge the entire balance sheet duration gap.

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Definitions:

Government Policy

This term refers to the actions taken by a government to influence or control different aspects of its economy or society, ranging from economic policies to social regulations.

Quantity Traded

The total amount of a particular good or service that is bought and sold within a certain period.

Government Policy

Decisions and laws enacted by a government to guide the direction and administration of its country or region, impacting the economy, society, and overall governance.

Producers' Reactions

The manner in which producers in a market respond to changes in market conditions, such as changes in input costs, technological advancements, or shifts in consumer demand.