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112
Which of the following best describes “stack and roll”?
A.Creates long-term hedges from short term futures contracts
B.Can avoid losses on futures contracts by entering into further futures contracts
C.Involves buying a futures contract with one maturity and selling a futures contract with a different maturity
D.Involves two different exposures simultaneously
A.Creates long-term hedges from short term futures contracts
B.Can avoid losses on futures contracts by entering into further futures contracts
C.Involves buying a futures contract with one maturity and selling a futures contract with a different maturity
D.Involves two different exposures simultaneously
Answer: A
Stack and roll is a procedure where short maturity futures contracts are entered into. When they are close to maturity they are replaced by more short maturity futures contracts and so on. The result is the creation of a long term hedge from short-term futures contracts.
Stack and roll is a procedure where short maturity futures contracts are entered into. When they are close to maturity they are replaced by more short maturity futures contracts and so on. The result is the creation of a long term hedge from short-term futures contracts.
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Flashcard info:
Author: CoboCards-User
Main topic: Finance & Investment
Topic: Derivatives
Published: 27.10.2015