basic hedging strategy involves
A) reducing hard currency assets and soft currency liabilities
B) increasing hard currency liabilities and soft currency assets
C) reducing soft currency assets and hard currency liabilities
D) converting soft currencies to hard currencies and lending hard currencies

Question

Quizplus · Accepted Answer

The basic hedging strategy involves reducing exposure to currency fluctuations by reducing soft currency assets and hard currency liabilities. This can be achieved by selling off soft currency assets and repaying hard currency liabilities, or by taking out hard currency loans to fund investments or pay off soft currency debts. By reducing exposure to currency fluctuations in this way, companies can help protect themselves from potentially damaging fluctuations in exchange rates. Choice A and B involve increasing exposure to currency fluctuations, while choice D involves taking on additional risk by lending hard currencies.

Basic Hedging Strategy Involves