Is a Residual Risk That Arises Because the Movement in a Spot

question 4

Multiple Choice

...is a residual risk that arises because the movement in a spot (cash) asset's price is not perfectly correlated with the movement in the price of the asset delivered under a futures or forward contract.

• A)Macro risk
• B)Micro risk
• C)Basis risk
• D)Duration risk

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Definitions:

Dividend-Payout Stock

NO. However, the concept closely resembles dividend-paying stocks, which are shares in a company that return a portion of the company's earnings to shareholders at regular intervals.

Transactions Costs

Expenses incurred during the purchase or sale of goods and services, which may include commissions, fees, and other charges.

Investors

Individuals or entities that allocate capital with the expectation of receiving financial returns.

Investor Aversion

A reluctance or aversion among investors to take on risky investments, preferring safer, more predictable returns instead.