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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
4 months ago
Short hedge can have basis risk too, but not like cross hedge.
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Elliott
4 months ago
I agree, cross hedge is the right answer!
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Paris
4 months ago
Wait, is stack hedge really a thing? Sounds odd.
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Micah
4 months ago
No way, I thought long hedge had more basis risk!
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Van
5 months ago
Definitely C, cross hedge is where the basis risk kicks in.
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Eun
5 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
5 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
5 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
5 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
6 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
6 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
6 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
6 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
11 months ago
B) Short hedge? Nah, that's for cowards. C is the one that really hedges your bets.
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Ilda
10 months ago
B) Short hedge may seem risky, but it can also have its advantages.
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Fausto
10 months ago
C) Cross hedge is a bit more complex but can be effective in certain situations.
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Yasuko
10 months ago
A) Long hedge is also a good option to consider.
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Delmy
12 months ago
D) Stack hedge? More like 'whack' hedge, am I right? C is the way to go.
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Yolando
10 months ago
C is definitely the way to go.
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Shawna
10 months ago
C) Cross hedge
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Mable
11 months ago
B) Short hedge
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Louisa
11 months ago
A) Long hedge
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Georgene
12 months 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
11 months ago
Yes, it definitely adds complexity to the hedging strategy.
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Barbra
11 months ago
Cross-hedging can be tricky.
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Jerry
11 months ago
D) Stack hedge
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Rosendo
11 months ago
C) Cross hedge
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Herminia
11 months ago
B) Short hedge
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Wilbert
11 months 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
10 months ago
D) Stack hedge is not a common term in hedging strategies.
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Louisa
10 months ago
C) Cross hedge involves hedging with a different asset than the one being hedged.
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Alisha
10 months ago
B) Short hedge involves selling a futures contract to hedge against price decreases.
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Vince
11 months ago
A) Long hedge involves buying a futures contract to hedge against price increases.
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Luisa
11 months ago
D) Stack hedge is not a valid option for this scenario.
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Horace
11 months 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
11 months 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
12 months 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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