An Example of Cross-Hedging Is

question 89

Multiple Choice

An example of cross-hedging is:

• A) find two currencies that are highly positively correlated; match the payables of the one currency to the receivables of the other currency.
• B) use the forward market to sell forward whatever currencies you will receive.
• C) use the forward market to buy forward whatever currencies you will receive.
• D) B and C

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Definitions:

Lexicographic Rule

A decision-making rule where alternatives are compared based on the most important attribute first; if one option is superior, the decision is made, otherwise the next most important attribute is considered.

Attribute Preference Rule

A decision rule used by consumers, focusing on a single characteristic of a product to make a choice, often when other decision criteria are overwhelming or unclear.

Disjunctive Rule

A decision-making rule applied when choosing among alternatives, focusing on selecting the option that has at least one attribute exceeding a threshold level.

Non-compensatory Decision-making Rule

A decision rule where if an option does not meet at least one important criterion, it is dropped from consideration, regardless of its merits on other criteria.