1. A buyer's margin account must always have a daily balance sufficient to cover at least one day's potential loss.

True / False

2. The risk that arises because the value of the futures contract will not be perfectly correlated with the firm's exposure is called:

A. speculation risk.

B. margin risk.

C. commodity price risk.

D. basis risk.

E. liquidity risk.

3. Which of the following is a customized agreement between two parties who are known to each other to trade an asset on some future date, at a price that is fixed today?

A. margin

B. futures contract

C. option hedging

D. forward contract

E. interest rate swap