The two basic types of hedges involving the futures market are long hedges and short hedges, where the words "long" and "short" refer to the maturity of the hedging instrument. For example, a long hedge might use Treasury bonds, while a short hedge might use 3-month T-bills. True False

Question

Gerald Rollins

Business

20 June, 13:18

The two basic types of hedges involving the futures market are long hedges and short hedges, where the words "long" and "short" refer to the maturity of the hedging instrument. For example, a long hedge might use Treasury bonds, while a short hedge might use 3-month T-bills. True False

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India Jones · Answer 1

False

Explanation:

The reason is that the short hedge is future contract sold by the seller of inventory and long hedge is the future contract purchased by the seller of the inventory at a specified date and at a agreed price. So the statement is incorrect and also that the long hedge or short hedge does not have any association with maturity or duration of hedging instrument.