A farmer has a long position in barley and hedges it with a short position in wheat. Which one of the following terms applies to this situation?
A)cross-arbitrage
B)parity play
C)market arbitrage
D)cross-hedge
E)program trade

Question

Quizplus · Accepted Answer

The practice of hedging using a different but related commodity is called cross-hedging. In this case, the farmer is hedging their long position in barley with a short position in wheat.

A Farmer Has a Long Position in Barley and Hedges