When will the estimated hedge ratio be greater than one?
A) When spot rate changes are greater than futures rate changes.
B) When spot rate changes are less sensitive than futures price changes over time.
C) When spot rate changes are equally sensitive as futures price changes over time.
D) When basis risk is absent.
E) When the spot and future exchange rates are expected to move perfectly together.
Correct Answer:
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Q61: Which of the following indicates the need
Q62: Why does basis risk occur?
A)Changes in the
Q63: An FI issued $1 million of 1-year
Q64: Which of the following is an example
Q65: Historical analysis of recent changes in exchange
Q67: How is a hedge ratio commonly determined?
A)By
Q68: The covariance of the change in spot
Q69: The primary benefit of a futures exchange
Q70: Futures contracts are standard in terms of
Q71: What is overhedging?
A)Selectively hedging a proportion of
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