An example of cross-hedging is:
A)find two currencies that are highly positively correlated; match the payables in one currency to the receivables in the other currency.
B)use the forward market to sell forward whatever currencies you will receive.
C)use the forward market to buy forward whatever currencies you will receive.
D)B and C

Question

An example of cross-hedging is:​
A)find two currencies that are highly positively correlated; match the payables in one currency to the receivables in the other currency.
B)use the forward market to sell forward whatever currencies you will receive.
C)use the forward market to buy forward whatever currencies you will receive.
D)B and C

Quizplus · Accepted Answer

Cross-hedging involves matching payables and receivables in two different, but highly correlated, currencies to mitigate the risk associated with currency fluctuations. This strategy does not directly involve the forward market, distinguishing it from options B and C, which are direct hedging strategies using forward contracts.

An Example of Cross-Hedging Is:​

An Example of Cross-Hedging Is: