Question: 5. Identify the one true statement about default risk: (a) Right of offset makes default risk of forward contracts higher and more important to hedge

5. Identify the one true statement about default risk: (a) Right of offset makes default risk of forward contracts higher and more

important to hedge

(b) As the futures market is an over-the-counter market, there can be significant default risk, but markets have developed various ways and means to reduce the potential impact of default risks

(c) Hedging can reduce the costs of bankruptcy and financial distress (d) Hedging of pooled cash flows can introduce default risk (e) None of the above

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