A gold producer wants to hedge his loses attributable to a fall in the price of gold for his current gold currency. This is an example of:

Question

Quizplus · Accepted Answer

The producer wants to hedge against a fall in the price of gold, which is a commodity. Therefore, a commodity swap would be the appropriate instrument for hedging in this scenario. Currency swaps involve exchanging one currency for another, and interest rate swaps involve swapping one type of interest rate or payment stream for another.

A Gold Producer Wants to Hedge His Loses Attributable to a Fall