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Question
Which of the following is an example of microhedging asset-side portfolio risk?
A. When an FI, attempting to lock in cost of funds to protect itself against a rise in short-term interest rates, takes a short position in futures contracts on CDs.
B. FI manager trying to pick a futures contract whose underlying deliverable asset is not matched to the asset position being hedged.
C. When an FI hedges a cash asset on a direct dollar-for-dollar basis with a forward or futures contract.
D. When an FI manager wants to insulate the value of the institution's bond portfolio fully against a rise in interest rates.
E. When an FI manager wishes to use futures or other derivative securities to hedge the entire balance sheet duration gap.
Answer
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