Question

Which of the following techniques are included in Internal hedging? (Multiple choices allowed)

 Currency speculation

 Home currency invoicing

 Natural hedging

 FX Contracts
 Lagging

 All of the above

 FX Swaps
 Leading
 None of the above

Answer 1

The correct choices are option 2 , option 5 & option 8

Explanation:- A firm makes use of internal hedging technique to minimize foreign exchange exposure and the techniques used are:-

• Leading and lagging.
• Invoicing in home currency.
• Matching
• Multilateral netting.

The above are known as internal hedging techniques because they are available within the business and by using these techniques, the firm will avoid the costs of market based hedging techniques.