In order to reduce market risk associated with bonds held in inventory, a dealer can
A) take a long position in bond futures.
B) take a short position in bond futures.
C) purchase bonds at the mark-to-market settlement price.
D) use settlement by offset procedures.

Question

Quizplus · Accepted Answer

Taking a short position in bond futures would offset any losses incurred from declining prices of the actual bonds held in inventory. This would provide a hedge against market risk.

In Order to Reduce Market Risk Associated with Bonds Held