If Changes in Spot and Futures Prices Are Uncorrelated, Then

question 6

Multiple Choice

If changes in spot and futures prices are uncorrelated, then

• A) The minimum variance hedge ratio is zero.
• B) Basis risk is zero.
• C) Hedging the spot position with futures is effective because the portfolio is well-diversified.
• D) The minimum variance hedge requires holding equal amounts of spot and futures.

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