Hedging one commodity by using a futures contract on another commodity is called
A)surrogate hedging.
B)cross hedging.
C)alternative hedging.
D)correlative hedging.

Question

Quizplus · Accepted Answer

Cross hedging involves hedging one commodity by using a futures contract on another commodity which has a similar price movement. The term "cross" refers to using a contract from a different market to hedge a specific risk. It can be used when an exact futures contract for the commodity being hedged is not available or when using the available contract may expose the hedger to unwanted risks.

Hedging One Commodity by Using a Futures Contract on Another