--%>

Costs of hedging through forward contract

Discuss and compare the costs of hedging through the forward contract and the options contract.

E

Expert

Verified

There exists no up-front cost of hedging by forward contracts. In case of options hedging, though, hedgers must pay the premiums for the contracts up-front. Cost of forward hedging, though, can be realized ex post when the hedger regrets his/her hedging decision.

   Related Questions in Financial Accounting

  • Q : Personal identities-Organization health

    Personal identities: Generally employees like to work as they interact with animals and success motivates them, they learn new things in their routine job and they are a member to team.  But some job requirements like conducting euthanasia impact

  • Q : Investment approach of Lynch Investment

    Investment approach of Lynch: Peter Lynch, the best known mutual fund manager, also adopts the words of Benjamin Graham in the sense that he looks at companies not from the perspective of how the stock prices move

  • Q : What is correspondent bank relationship

    Explain what you mean by Correspondent bank relationship.

  • Q : Define Liabilities Liabilities mean the

    Liabilities mean the amount which the firm owes to the outsiders. Liabilities are of two types: -Long term liabilities & Short term liabilities. Examples of long term liabilities are long terms loans, bonds etc. & examples of short term liabil

  • Q : What is the equivalent rate A bank

    A bank quotes an interest rate of 13.5% per annum with quarterly compounding. What is the equivalent rate with (a) continuous compounding and (b) annual compounding?

  • Q : Article on maintenance policy for plant

    Write an article on the maintenance policy for overall costs and enhancing plant productivity.

  • Q : Avoidable Interest The book says

    The book says "avoidable interest is the amount of interest cost during the period that a company could theoretically avoid if it had not made expenditures for the asset." This makes it sound like avoidable interest is the total amount of interest paid for an asset. I know it's not but I was wonder

  • Q : Types of groups Identify and describe 4

    Identify and describe 4 types of groups; provide examples.

  • Q : Define deviance Define deviance ; give

    Define deviance; give three illustrations of deviant behavior and use them to explain why deviance is socially constructed.

  • Q : Who is a debtor Who is a debtor ?

    Who is a debtor? Briefly explain the term.