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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › methods of hedging
I have two questions relating to methods of hedging the transaction risk.
[Question 1]
They all are used for Short-term hedging techniques:
Forward Contracts; Money Market Hedge; Currency Futures; Currency Options
It is a Long-term hedging technique:
Currency Swaps
[Question 2]
They all are used for hedging big amounts of foreign currency:
Forward Contracts; Money Market Hedge; Currency Futures; Currency Swaps
While these are used for hedging lower amounts of foreign currency:
Currency Options
Am I correct?
You are correct for question 1.
For question 2, forward rates can be used for small amounts, the others are for larger amounts.