A Naïve Hedge Is One

question 8

Multiple Choice

A naïve hedge is one

• A)in which the hedger is not fully informed.
• B)in which the hedger attempts to eliminate all of the risk of the underlying spot position.
• C)in which the hedger uses microhedges rather than macrohedges to limit risk.
• D)in which the hedger unwittingly increases the risk of the FI's position.
• E)that does not have to be reported on the FI's financial statements.

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Definitions:

Judicial Branch

The branch of government responsible for interpreting the laws, adjudicating legal disputes, and administering justice.

World Court

The International Court of Justice (ICJ), the principal judicial organ of the United Nations, responsible for settling legal disputes between states and giving advisory opinions on international legal issues.

United Nations

An international organization founded in 1945 dedicated to maintaining international peace and security, developing friendly relations among nations, and promoting social progress.

Letter of Credit

A financial document issued by a bank guaranteeing the payment of a buyer's obligations to a seller within a specific time frame and under certain conditions.