Which Hedging Technique Is Best to Use to Hedge Contingent

question 25

Multiple Choice

Which hedging technique is best to use to hedge contingent exposure?

• A) Forward hedge
• B) Money market hedge
• C) Option hedge
• D) Hedging with swaps

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Definitions:

Extraordinary Items

Events and transactions that are distinct from the ordinary activities of a company and have a significant impact on its financial position.

Discontinued Operations

Parts of a company's business that have been sold, disposed of, or otherwise terminated, which are reported separately from continuing operations in financial statements.

Systematic Allocation

The process of apportioning costs or revenues over a specific period in a methodical and logical manner, often used in depreciation and amortization.

Immediate Recognition

The accounting practice of recording revenues or expenses as soon as they are incurred, without deferral.