What is a macrohedge?
A) It is a hedge of the bank's aggregate portfolio.
B) It is a hedge using just one type of futures contract.
C) It is the hedge of a specific asset or liability for which the bank is exposed to interest rate risk.
D) It is a hedge using two or more types of futures contracts.
E) It is a has that has a duration of less than one month.

Question

Quizplus · Accepted Answer

A macrohedge is a hedge of the bank's aggregate portfolio, which may incorporate various types of financial instruments and strategies to manage overall risks. It aims to protect the bank's financial performance from adverse market conditions and uncertainties, such as interest rate changes, currency fluctuations, credit risks, and market volatility. Unlike micro-hedges, which focus on specific assets or liabilities, macro-hedges take a broader perspective on the bank's overall risk exposure and seek to optimize the risk-return tradeoff of the entire portfolio.

What Is a Macrohedge