If the Minimum-Variance Hedge Ratio Is +1, Then Which of the Following

question 4

Multiple Choice

If the minimum-variance hedge ratio is +1, then which of the following is true?

• A) There is no basis risk.
• B) The variance of the hedged cash flows is zero.
• C) Both (a) and (b) must be true.
• D) Neither (a) nor (b) is necessarily true.