If Changes in Spot and Futures Prices Have a Correlation $- 1$

question 10

Multiple Choice

If changes in spot and futures prices have a correlation of $- 1$ , then

• A) The hedge ratio is \(- 1\) .
• B) The variance of cash flows from a hedged position under the minimum-variance hedge ratio is zero.
• C) The net cash flow at maturity of the hedge is zero.
• D) The standard deviation of spot price changes must equal the negative of the standard deviation of futures price changes.

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