If a firm is hedging payables with futures contracts, it may end up paying more for the payable than it would have had it remained unhedged if the foreign currency depreciates.

Question

Quizplus · Accepted Answer

If the foreign currency depreciates, the futures contract will result in a loss for the firm, causing them to pay more for the payable than they would have if they had remained unhedged.

If a Firm Is Hedging Payables with Futures Contracts, It