A Naive Hedge Occurs When

Multiple Choice

A naive hedge occurs when

A) an FI manager wishes to use futures or other derivative securities to hedge the entire balance sheet duration gap.
B) a cash asset is hedged on a direct dollar-for-dollar basis with a forward or futures contract.
C) an FI reduces its interest rate or other risk exposure to the lowest possible level by selling sufficient futures to offset the interest rate risk exposure of its whole balance sheet.
D) an FI purchases an insurance cover to the extent of 80% of losses arising from adverse movement in asset prices.