Financial futures may be used by banks to manage
A) default risk
B) liquidity risk
C) interest rate risk
D) operation risk
E) sovereign country risk

Question

Quizplus · Accepted Answer

Financial futures are contracts that allow for buying or selling an underlying asset, such as commodities or financial instruments, at a future time and at a predetermined price. Banks may use financial futures to manage interest rate risk, which refers to the risk of fluctuations in interest rates impacting the value of their assets and liabilities. By hedging with financial futures, banks can reduce their exposure to such risks, thereby managing their overall risk profile.

Financial Futures May Be Used by Banks to Manage