An example of cross-hedging is:
A) find two currencies that are highly positively correlated; match the payables of the one currency to the receivables of the other currency.
B) use the forward market to sell forward whatever currencies you will receive.
C) use the forward market to buy forward whatever currencies you will receive.
D) B and C

Question

Quizplus · Accepted Answer

Cross-hedging involves using a financial instrument or asset to hedge against the risk of another asset that is not perfectly correlated. In this case, matching payables and receivables of two highly positively correlated currencies is an example of cross-hedging.

An Example of Cross-Hedging Is