Hedging an FX risk exposure with a forward contract will always provide a better outcome than not hedging the exposure.

Question

Quizplus · Accepted Answer

Hedging an FX risk exposure with a forward contract may not always provide a better outcome than not hedging the exposure. If the underlying currency appreciates, the hedged outcome may be worse than the unhedged outcome. The decision to hedge or not hedge depends on various factors such as the size of the exposure, the currency volatility and the hedging cost.

Hedging an FX Risk Exposure with a Forward Contract Will