Why is the size of the stack so important to the cash-flow effects of the stack-and-roll hedge but less important to the profit-and-loss effects when hedge accounting is used?
What will be an ideal response?
As the mountain of futures contracts are marked to market and/or expire, they have immediate cash flow consequences. By contrast, so long as the stack of futures contracts is being used to hedge a series of forward contracts, hedge accounting allows companies to consider the forward contracts and their hedges (i.e., the rolling mountain of futures contracts) together. Therefore, the gains or losses on the accumulation of forward positions are offset by the losses or gains on the mountain of futures market hedges.
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The value of a futures option is defined as
A) the difference between the option's strike price and its original purchase price. B) the difference between the option's strike price and the market price of the underlying futures contract. C) the strike price of the option multiplied by the mark-to-the-market value. D) the mark-to-the-market value divided by the strike price.
A program that appears to have a useful function but that contains a hidden function that presents a security risk best defines
A) virus. B) worm. C) Trojan horse. D) botnet.