Which of the following about hedging is incorrect?
A) With the Australian future market an investor will have to use a 90-day bank-accepted-bill to hedge commercial paper.
B) In the Australian futures market a borrower will have to use 3-year Treasury bond futures to hedge a loan facility with a term to maturity of 3 to 5 years.
C) A borrower will have to use a 10-year Treasury bond future to hedge an issue of long-term debentures.
D) When prices of 3-year Treasury bond futures varies over time with the prices of long-term debentures this is called spread-commodity hedging.

Question

Quizplus · Accepted Answer

Spread-commodity hedging involves hedging two different but related products, in this case, 3-year Treasury bond futures and long-term debentures. However, it is not correct to say that this type of hedging is called spread-commodity hedging. It is actually called spread or intercommodity hedging. Therefore, choice D is incorrect. The other choices are correct.

Which of the Following About Hedging Is Incorrect