When cross-hedging,
A)try to find one asset that has a positive correlation with another asset.
B)the main thing is to find one asset that covaries with another asset in some predictable way.
C)try to find one asset that has a negative correlation with another asset.
D)none of the above

Question

Quizplus · Accepted Answer

Cross-hedging involves hedging a position in one asset with another asset that is not an exact match but has some predictability with the original asset. Therefore, the main thing is to find an asset that covaries with the original asset in some predictable way, not necessarily with a positive or negative correlation.

When Cross-Hedging