Because under parity the forward and the money market hedges provide identical outcomes,money market hedges are also known as:
A)symmetrical forward hedges.
B)synthetic forward hedges.
C)matching hedges.
D)asymmetrical forward hedges.

Question

Quizplus · Accepted Answer

Money market hedges are referred to as synthetic forward hedges because they replicate the outcome of a forward contract using domestic and foreign interest rates to hedge foreign exchange risk, thus providing an outcome similar to that of a forward hedge under the parity condition.

Because Under Parity the Forward and the Money Market Hedges