Which of the following statements about currency hedging are incorrect?
A) An example of an operating hedge is a covered forward contract because the cover comes from operating cash flows.
B) An example of a natural hedge is to have monetary assets denominated in a particular foreign currency on the balance sheet offset liabilities in the same currency and same maturity.
C) An example of a contractual hedge is a money market hedge because a formal contractual relationship is established to lock in the exact terms of a future transaction.
D) None of the statements above; all are correct.

Question

Quizplus · Accepted Answer

A) is incorrect because a covered forward contract is a financial, not an operating hedge. Operating hedges involve adjustments to business operations or corporate strategies, not financial instruments.

Which of the Following Statements About Currency Hedging Are Incorrect