Cash flow matching can be effective hedging technique when
A) the exposure cash flow is relatively constant and predictable over time.
B) it is part of the risk-sharing agreement.
C) there are no local suppliers that can accept longer term payments in their home currency.
D) all of the above

Question

Quizplus · Accepted Answer

Cash flow matching is a hedging technique that involves matching the timing and amount of cash inflows and outflows to minimize the exposure to interest rate and liquidity risk. This technique is most effective when the exposure cash flow is relatively constant and predictable over time, as this allows for accurate matching of cash inflows and outflows. Choices B and C are not relevant to cash flow matching.

Cash Flow Matching Can Be Effective Hedging Technique When