Hedging in the futures markets can reduce all risk if:
A) price movements in both the cash and futures markets are perfectly correlated.
B) price movements in both the cash and futures markets have zero correlation.
C) price movements in both the cash and futures markets are less than perfectly correlated.
D) the hedge is a short hedge, but not a long hedge.
E) the hedge is a long hedge, but not a short hedgE.

Question

Quizplus · Accepted Answer

Hedging can eliminate risk if the price movements in the cash and futures markets are perfectly correlated, as this ensures that gains or losses in one market are offset by the opposite movements in the other.

Hedging in the Futures Markets Can Reduce All Risk If