Assume that the thrift variable-rate liabilities are CDs indexed to some domestic rate. Which of the following statements describes the hedge characteristics of the above example?
A)The thrift is exposed to basis risk because the CD rates may not be perfectly correlated with the LIBOR rates.
B)Only the bank is fully hedged.
C)The thrift is exposed to basis risk if the credit/default risk premium on the thrift's CDs increases over time.
D)All of the above.
E)Answers A and C only.

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The Answer of Assume that the thrift variable-rate liabilities are CDs indexed to some domestic rate. Which of the following statements describes the hedge characteristics of the above example?
A)The thrift is exposed to basis risk because the CD rates may not be perfectly correlated with the LIBOR rates.
B)Only the bank is fully hedged.
C)The thrift is exposed to basis risk if the credit/default risk premium on the thrift's CDs increases over time.
D)All of the above.
E)Answers A and C only.

Assume That the Thrift Variable-Rate Liabilities Are CDs Indexed to Some