With respect to selecting hedging instruments,"matching" refers to:
A)how closely the cost of the hedging instrument relates to the amount involved in the exposure being hedged.
B)the relationship between the firm seeking to hedge an exposure and the firm offering the hedging instrument.
C)the relationship of the two countries whose currency is involved in the hedge.
D)how closely the currency and maturity of the hedging instrument lines up with the exposure being hedged.

Question

Quizplus · Accepted Answer

"Matching" refers to selecting a hedging instrument that closely matches the currency and maturity of the exposure being hedged. Therefore, option D, which mentions the currency and maturity of the hedging instrument, is the correct choice. Option A is incorrect because it refers to the cost of the hedging instrument, which is not directly related to matching. Option B is incorrect because it refers to the relationship between two firms, which is not relevant to matching. Option C is incorrect because it refers to the relationship between two countries, which is also not relevant to matching.

With Respect to Selecting Hedging Instruments,"matching" Refers To