Which of the following statements is/are true?
A) A long hedge involves the purchase of futures contracts before the investor must buy the actual securities
B) The purpose of a long hedge is to guarantee a desired yield
C) The immediate sale of financial futures contracts is characteristic of a short hedge
D) A combined transaction between the spot and futures markets using different types of securities in each is a cross hedge
E) All of the above

Question

Quizplus · Accepted Answer

All the statements provided are true. A long hedge involves buying futures to lock in prices for future purchases, aiming to secure a certain yield or price. A short hedge involves selling futures to protect against price declines in assets an investor already holds. A cross hedge involves hedging a position with futures contracts of a different but related asset when direct hedging instruments may not be available or practical.

Which of the Following Statements Is/are True