22-63 an FI Has Reduced Its Interest Rate Risk Exposure

question 23

Multiple Choice

22-63 An FI has reduced its interest rate risk exposure to the lowest possible level by selling sufficient futures to offset the risk exposure of its whole balance sheet or cash positions in each asset and liability.The FI is involved in

• A)microhedging.
• B)selective hedging.
• C)routine hedging.
• D)overhedging.
• E)speculation.

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Definitions:

Fraud

Intentional deception made for personal gain or to damage another individual.

Voidable Contract

A voidable contract is a legal agreement that may be annulled or declared invalid by one of the parties due to certain defects, while remaining valid until such action is taken.

Result

The outcome or consequence of an action, process, or situation, often measured to determine success or failure.

Contract

An accord among several parties that is legally obligatory and subject to legal enforcement.