alleryStart learning →An exporter opens a factory in its customer's country to match revenues and costs in that currency. This is a:
APairs trade
BNatural hedge
CRisk reversal
DDelta hedge
Answer & Solution
Correct answer: B. Natural hedge
A natural hedge reduces risk by matching cash flows, such as foreign revenues and expenses, without derivatives.
Keep practising Futures Contract
Browse all Futures Contract questions for CA Final, or explore more Strategicfinancialmanagement topics.
Related questions
Futures contracts are highly standardized whereas forwards:Between two parties, which risk is higher in a forward than in a futures contract?Exchange limits on position size tighten close to expiry mainly to:A mutual fund tracking the S&P 500 invests inflows quickly in stock index futures. This prBuying spot and selling forward when the forward exceeds its fair value earns:Which is a standard use of forward contracts according to finance theory?Foreign exchange forwards are usually quoted as the difference from spot in:In a currency forward, the agreed currency amounts that are specified in the contract are