When an investment banker hedges a stock for initial distribution with stock index futures,
A)the underwriter intends to reduce the risk of loss during the distribution period.
B)there is potential of gain or loss on both the stock and the stock index futures.
C)he or she sells futures contracts.
D)All of the above

Question

Quizplus · Accepted Answer

When an investment banker hedges a stock for initial distribution with stock index futures, the underwriter intends to reduce the risk of loss during the distribution period, there is potential of gain or loss on both the stock and the stock index futures, and he or she sells futures contracts.

When an Investment Banker Hedges a Stock for Initial Distribution