A(n) _____ hedge protects the company from adverse exchange rate movements but allow the company to benefit from favorable movements.

Question

Quizplus · Accepted Answer

An options market hedge allows a company to benefit from favorable exchange rate movements while protecting it from adverse ones. By purchasing options, the company has the right, but not the obligation, to exchange currency at a predetermined rate, thus providing flexibility.

A(n) _____ Hedge Protects the Company from Adverse Exchange Rate