Which hedging technique is best to use to hedge contingent exposure?
A) Forward hedge
B) Money market hedge
C) Option hedge
D) Hedging with swaps

Question

Quizplus · Accepted Answer

Option hedge is best to use to hedge contingent exposure as it provides flexibility to exercise the option only in case the underlying asset's price moves unfavorably, thereby protecting the downside risk without limiting the upside potential. Other hedging techniques may have limitations in fully hedging contingent exposure.

Which Hedging Technique Is Best to Use to Hedge Contingent