When Choosing Between Forwards and Futures in Hedging a Transaction

question 42

True/False

When choosing between forwards and futures in hedging a transaction exposure to currency risk, the benefits of a higher quality hedge with a forward contract must be weighed against the transactions costs of the forward contract.

---

Definitions:

Hypotheses

Theories or assumptions made for the sake of argument or investigation that are to be tested through research or experimentation.

Unconscious

The unconscious consists of processes in the mind that occur automatically and are not accessible to introspection, including desires, memories, and motivations.

Sigmund Freud

A medical professional from Austria known for creating the psychoanalytical approach, which involves treating mental health issues through discussions between a patient and a therapist.

Archetypes

Carl Jung's concept of universally inherited, primitive mental images or patterns, deeply embedded in the collective unconscious.