Basis Risk Occurs Because It Is Generally Impossible to

question 6

Multiple Choice

Basis risk occurs because it is generally impossible to

• A)hedge unanticipated rate changes.
• B)exactly predict interest rate changes.
• C)exactly match the terms of the hedging instrument with the terms of the asset or liability at risk.
• D)find negatively correlated asset prices.
• E)All of these choices are correct.

---

Definitions:

Stressful Life Changes

Significant alterations in one's life situation, such as divorce or job loss, that can lead to increased stress and may necessitate psychological support.

Psychoanalysis

A therapeutic approach developed by Sigmund Freud that emphasizes unconscious processes and past conflicts as key influences on behavior.

Early Childhood Experience

These are events or conditions in one's early years, typically aged 0-6, that significantly influence psychological development and can impact behavioral patterns and mental health in adulthood.

Current Stressors

are the ongoing or recent events or conditions that cause stress and potentially impact an individual's mental health.