22-61 Which of the following indicates the need to place a hedge?
A)The price movement in the underlying cash asset can not be forecasted perfectly.
B)The prices of the assets or liabilities are imperfectly correlated over time with the prices on the futures.
C)Basis risk prevents the minimum risk of the portfolio from reaching zero.
D)Treasury has been issuing more shorter-dated bonds to finance U.S.budge deficits.
E)Spot bonds and futures on bonds are traded in different markets.

Question

Quizplus · Accepted Answer

The need to place a hedge arises when the price movement in the underlying cash asset cannot be forecasted perfectly, as hedging is used to mitigate the risk of unpredictable price changes.

22-61 Which of the Following Indicates the Need to Place