A Cross Hedge Often Has Greater Risk Then a Perfect

question 19

Multiple Choice

A cross hedge often has greater risk then a perfect hedge because:

• A)futures and cash interest rates are perfectly positively correlated.
• B)futures and cash interest rates are perfectly negatively correlated.
• C)cross hedging uses a contract based on the identical underlying asset.
• D)futures and cash interest rates may not move together.
• E)b.and d.

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