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American Bankers Association CTFA Exam - Topic 9 Question 88 Discussion

Actual exam question for American Bankers Association's CTFA exam
Question #: 88
Topic #: 9
[All CTFA Questions]

Which of the following involves an additional source of basis risk due to the difference between the asset being hedged and the asset underlying the futures?

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Suggested Answer: C

by Dianne at Apr 08, 2025, 03:18 PM

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Lauran
5 months ago
Short hedge can have basis risk too, but not like cross hedge.
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Elliott
5 months ago
I agree, cross hedge is the right answer!
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Paris
6 months ago
Wait, is stack hedge really a thing? Sounds odd.
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Micah
6 months ago
No way, I thought long hedge had more basis risk!
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Van
6 months ago
Definitely C, cross hedge is where the basis risk kicks in.
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Eun
6 months ago
I thought stack hedges were also related to basis risk, but now I'm confused about how they compare to cross hedges.
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Alease
7 months ago
I feel like I've seen a question like this before, and I think it was about how cross hedges can lead to additional basis risk.
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Regenia
7 months ago
I'm not entirely sure, but I remember something about basis risk being more pronounced in cross hedges compared to long or short hedges.
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Sharen
7 months ago
I think the answer might be C, Cross hedge, because it involves hedging an asset with a different underlying asset.
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Steffanie
7 months ago
I'm a bit confused on the distinction between the hedge types. Can someone explain the differences in a simple way? I want to make sure I understand this concept before answering.
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Sarah
7 months ago
Okay, I've got this. The key is to identify which hedge type involves using a different asset than the one being hedged, which can introduce additional basis risk. I'm going with option C, cross hedge.
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Susana
8 months ago
Hmm, this is a tricky one. I'm not entirely sure about the differences between the hedge types and the basis risk involved. I'll need to think this through carefully.
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Arthur
8 months ago
This question is asking about the different types of hedges and the associated basis risk. I think I know the answer, but I want to double-check my understanding before selecting an option.
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Timothy
1 year ago
B) Short hedge? Nah, that's for cowards. C is the one that really hedges your bets.
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Ilda
11 months ago
B) Short hedge may seem risky, but it can also have its advantages.
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Fausto
12 months ago
C) Cross hedge is a bit more complex but can be effective in certain situations.
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Yasuko
12 months ago
A) Long hedge is also a good option to consider.
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Delmy
1 year ago
D) Stack hedge? More like 'whack' hedge, am I right? C is the way to go.
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Yolando
11 months ago
C is definitely the way to go.
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Shawna
11 months ago
C) Cross hedge
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Mable
1 year ago
B) Short hedge
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Louisa
1 year ago
A) Long hedge
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Georgene
1 year ago
I'm not sure, but I think D) Stack hedge could also involve basis risk.
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Kris
1 year ago
I agree, C is the correct answer. Cross-hedging introduces that extra layer of uncertainty.
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Ardella
1 year ago
Yes, it definitely adds complexity to the hedging strategy.
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Barbra
1 year ago
Cross-hedging can be tricky.
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Jerry
1 year ago
D) Stack hedge
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Rosendo
1 year ago
C) Cross hedge
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Herminia
1 year ago
B) Short hedge
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Wilbert
1 year ago
A) Long hedge
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Cory
1 year ago
C) Cross hedge, definitely. The basis risk is the key factor here.
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Arlene
12 months ago
D) Stack hedge is not a common term in hedging strategies.
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Louisa
12 months ago
C) Cross hedge involves hedging with a different asset than the one being hedged.
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Alisha
12 months ago
B) Short hedge involves selling a futures contract to hedge against price decreases.
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Vince
1 year ago
A) Long hedge involves buying a futures contract to hedge against price increases.
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Luisa
1 year ago
D) Stack hedge is not a valid option for this scenario.
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Horace
1 year ago
C) Cross hedge definitely involves an additional source of basis risk due to the difference between the asset being hedged and the asset underlying the futures.
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Sherell
1 year ago
B) Short hedge does not involve an additional source of basis risk due to the difference between the asset being hedged and the asset underlying the futures.
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Merilyn
1 year ago
A) Long hedge involves an additional source of basis risk due to the difference between the asset being hedged and the asset underlying the futures.
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German
1 year ago
I agree with Mitzie, cross hedge involves an additional source of basis risk.
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Mitzie
1 year ago
I think the answer is C) Cross hedge.
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