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An analyst is managing a portfolio denominated in a foreign currency, and he plans to hold the portfolio one year. The analyst computes the hedge ratio of the portfolio to be equal to one, and he plans to implement the appropriate hedge. Which of the following actions will reduce basis risk? A. Nothing; since the hedge ratio equals one the basis risk is zero. B. Taking a futures position that matures in one year. C. Taking successive one-month futures contracts for the upcoming year. |