The Trade-Off When Considering Alternative Call Options to Hedge a Currency

question 45

True/False

The trade-off when considering alternative call options to hedge a currency position is that an MNC can obtain a call option with a higher exercise price, but would have to pay a higher premium.

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Definitions:

Standard Error

A statistical term that describes the standard deviation of the sampling distribution of a statistic, often used to measure the accuracy with which a sample represents a population.

Correlation

A statistical measure that indicates the extent to which two or more variables fluctuate together.

Standard Deviation

A statistical measurement that shows how much variation or dispersion exists from the average (mean), indicating how spread out the values in a data set are.

Mean

The arithmetic average of a set of numbers, calculated by adding up all the values and then dividing by the count of numbers.