Before You Can Use the Hedging Strategies Such as a Forward

question 35

Short Answer

Before you can use the hedging strategies such as a forward market hedge,options market hedge,and so on,you should consider running a regression of the form P = a + b × S + e .When reviewing the output,you should initially focus on
A)the intercept a.
B)the slope coefficient b.
C)mean square error,MSE.
D)R^2. <sup

• A)the intercept a.
• B)the slope coefficient b.
• C)mean square error,MSE.
• D)R^2. <sup

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Definitions:

Foreign Currency Transaction

A business operation involving the exchange of currencies from two different countries.

Spot Rate

The current market price at which a particular currency can be bought or sold for immediate delivery.

Receivable

Amounts owed to a company by its customers or debtors for goods or services delivered that have not yet been paid.

Pooling of Interests Transaction

A method used in accounting for business mergers in which the assets and liabilities of the merging companies are combined using their book values.