An analyst at an investment bank is researching various hedging techniques used by clients of the bank. The analyst subsequently finds that several clients utilize stack and roll hedging strategies. Which of the following describes the most appropriate motivation for using a stack-and-roll hedging strategy?

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The timing and amount of the risk exposure are not known.

Cash flows from stack-and-roll hedges are not exchanged until the last futures contract matures.

The ability to enter short-term hedges at more advantageous prices improves the performance over that of a longer-term hedge program.

There is greater liquidity in some futures contract maturities than others.

Financial Risk Manager Part 1