Answer: Portfolio 1

**Explanation:** - **Correct Answer (A):** A short futures position acts as a firm commitment to hedge the stock. The value of the futures contract changes in a manner similar to a long position in the underlying asset. This use of a derivative to offset exposure to the underlying is termed hedging. Firm commitments include forward contracts, futures contracts, and swaps involving periodic cash flow exchanges. - **Incorrect Answer (B):** A short call option is a contingent claim, not a firm commitment. Contingent claims, such as options, allow one counterparty to decide whether and when the trade will settle, unlike firm commitments. - **Incorrect Answer (C):** A short warrant position is also a contingent claim, similar to options. Warrants, which are options granted to employees or sold publicly, do not qualify as firm commitments.

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