All of the Following Hedges Are Used for Future Purchase/sale

question 39

Multiple Choice

All of the following hedges are used for future purchase/sale transactions except

• A) Forward contracts used as a fair value hedge of a firm commitment.
• B) Options used as a fair value hedge of a firm commitment.
• C) Option contract cash flow hedge of a forecasted transaction.
• D) Forward contract cash flow hedges of a forecasted transaction.
• E) Forward contracts used to hedge a foreign currency denominated liability.

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Definitions:

Poisson Distribution

A probability distribution that expresses the probability of a given number of events occurring in a fixed interval of time or space.

Negative Exponential Distribution

A probability distribution used to model time between events in a Poisson process, indicating a constant rate of occurrence.

Average Arrival Rate

A metric used to measure the rate at which entities (customers, goods, etc.) arrive at a facility or system over a specified period.

Average Service Rate

The average number of customers or units that can be processed over a certain time frame in a service system.