'Basis Risk' Can Be Defined As

question 65

Multiple Choice

'Basis risk' can be defined as:

• A)the chance that a hedge instrument will not precisely manage a risk exposure
• B)the chance of a futures position resulting in a loss
• C)the chance of the physical market transaction resulting in a loss
• D)the risk a hedged investment earns more than expected
• E)the risk a hedged debt costs less than expected.

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Definitions:

Operant Conditioning

A learning process through which behavior is shaped and maintained by its consequences, including reinforcements and punishments.

Extinction

Extinction in behavioral psychology refers to the gradual weakening and disappearance of a conditioned response when the reinforcement is no longer provided.

Extinction

In behavioral psychology, the process whereby a learned response is reduced or eliminated, often as a result of repeated absence of the expected reinforcement.

Conditioned Stimulus

A previously neutral stimulus that, after being associated with an unconditioned stimulus, elicits a conditioned response.