Your Firm Operates an Oil Refinery and Is Therefore Naturally

Multiple Choice

Your firm operates an oil refinery and is therefore naturally short on crude oil. You buy offsetting oil market futures to hedge your natural position. Shortly thereafter, local pipelines were damaged in a recent earthquake, leaving you with the highest local crude oil prices in decades. Simultaneously, unexpectedly high recent production from Mexico, Brazil, and the Baltic Sea has driven down the global price of crude and your financial hedge has lost you millions. You have fallen victim to what kind of risk?

A) Counterparty risk
B) Basis risk
C) Market risk
D) Political risk