A futures hedge in which there is a match with the underlying position on both currency and maturity is called a ______.
A) cross-hedge
B) delta-cross-hedge
C) delta-hedge
D) perfect hedge
E) None of the above

Question

Quizplus · Accepted Answer

A perfect hedge involves matching both the currency and maturity of the underlying position, thereby completely eliminating any price risk. A cross-hedge involves hedging with a futures contract that differs from the underlying position in either currency or maturity, while a delta-cross-hedge and delta-hedge involves hedging based on the sensitivity of the underlying position to changes in price.

A Futures Hedge in Which There Is a Match with the Underlying