If interest rate parity exists, and transaction costs do not exist, the option hedge will yield the same results as no hedge.

Name: If interest rate parity exists, and transaction costs do not exist, the option hedge will yield the same results as no hedge.
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Question

Quizplus · Accepted Answer

Interest rate parity ensures that the forward exchange rate eliminates arbitrage opportunities, but an option hedge provides different risk management and potential outcomes compared to not hedging.

If Interest Rate Parity Exists, and Transaction Costs Do Not