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Question 3 You are a natural gas seller in New York, and you hedge your price risk with a futures contract, deliverable at Henry Hub,

Question 3

You are a natural gas seller in New York, and you hedge your price risk with a futures contract, deliverable at Henry Hub, Louisiana. Which of the following statements is true?

a.

You can fully hedge your risk with the futures contract
b.

The risk you face after hedging is the product basis risk
c.

You cannot hedge the location basis with the futures contract
d.

Your net hedge price will be equal to the futures price

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