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Sir, I Went Through This Concept. Money Market Hedging Doesn’t Cut Off All The Risk, Right? In Case Of Payment, It Just Keeps Us At A Safer Side If Rates Increase And Doesn’t Help Us If The Rates Fall. Am I Right?
No, you are not right.
Money market hedging effectively fixes the effective exchange rate, regardless of whether the spot rate increases or decreases.
Do watch my free lectures on this. I explain what is happening in detail, with examples.
The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.
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