11. What is the purpose of hedging with futures? a. Cancel deviations in the spo

Question

11. What is the purpose of hedging with futures?
a. Cancel deviations in the spot on the closing date from the present spot
b. Cancel deviations in the spot on the closing date from the forward for the closing date
c. Minimize variance of the hedged position
d. Two of the above
e. All of the above

12. In theory, futures prices move perfectly with:
a. Deviations in the spot rate from the current spot
b. Deviations in the spot rate from the forward rate on contract maturity
c. Deviations of the forward rate for the maturity date of the contract
d. Two of the above
e. All of the above

13. How is hedging different when using futures vs. forwards?
a. Hedging with futures, you take delivery of the underlying currency, therefore locking in the price of the currency
b. Hedging with futures, you hold the contracts to expiration
c. Hedging with futures, you offset gains or losses on the spot price for the currency with gains or losses on the futures position
d. Two of the above
e. All of the above

Explanation / Answer

11) d 12) c 13) a

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