When there is a full forward cover with the spot rate equal to the forward rate all of the following are true EXCEPT:
A) The hedge is asymmetric.
B) There is no uncovered exposure remaining.
C) The total position is a perfect hedge.
D) The currency hedge ratio is equal to 1.

Question

Quizplus · Accepted Answer

A full forward cover with the spot rate equal to the forward rate means that the company has fully hedged their exposure and there is no remaining uncovered exposure. The total position is a perfect hedge and the currency hedge ratio is equal to 1. However, the hedge is not asymmetric in this case as the spot rate and the forward rate are the same.

When There Is a Full Forward Cover with the Spot