Hedging foreign exchange risk in the futures market may involve uncertainty about all of the transactions necessary to achieve the hedge to fulfillment.

Question

Quizplus · Accepted Answer

Hedging foreign exchange risk involves taking positions in the futures market that offset the exposure to changes in exchange rates. However, there may be uncertainty about the size and timing of the transactions necessary to achieve the desired hedge to fulfillment. This uncertainty is inherent in any market and cannot be fully eliminated.

Hedging Foreign Exchange Risk in the Futures Market May Involve