Question

With hedge

Group of answer choices

an optimal payoff is guaranteed regardless of the market conditions.

the cash flow volatility of the firm should decrease.

you should spend at least as much time working the hedge as working the underlying deal itself.

you should try to make money on both sides of the transaction.

Answer 1

Hedging can be defined as the process of buying or selling the financial instruments in order to offset or balance the current positions and minimizing the fireign exchange risk exposure. This means the person has completely hedged his or her current position from the fluctuations of the market risks. It does not guarantee about the cash flow fluctuations but the market fluctuations are covered.

So, the correct answer will be OPTION A-an optimal payoff is guaranteed regardless of the market conditions.