Which of the following is a hedging instrument? _____

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BlackTom AI · Accepted Answer

The question asks to identify which item among the options functions as a hedging instrument. 
Option a: Forward contract. A forward contract is a classic hedging instrument used in finance and commodities to lock in a price or rate for a transaction that will occur in the future, thereby mitigating price risk. This makes it a correct choice. 
Option b: Invoice. An invoice is a document used for billing and payment, not a tool for managing or hedging financial risk; it does not serve to offset price or currency fluctuations. 
Option c: Certificate of origin. This document certifies the country of origin of goods and is used for customs and trade compliance, not for hedging price or risk exposure. 
Option d: Packing list. A packing list enumerates items and packaging details for shipment; it aids logistical coordination but does not provide a hedging mechanism against price or risk. 
In summary, among the given options, a forward contract is the instrument designed for hedging purposes, while the others are documents used for administrative or logistical reasons rather than risk management.

Which of the following is a hedging instrument? _____

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Similar Questions

We are able to sell or go short futures and forwards, even when we don't own them, because they are derivatives. This means a contract is created each time a buyer and seller make a new transaction.

From a financial standpoint, futures are virtually identical to forwards

The main difference between forward and futures contracts is that:

Part 1Financial instruments with returns tied to previously issued securities are called:Part 2 A. financial derivatives B. reversible bonds C. hedge securities D. convertible bonds

Which market involves the trading of derivative securities?

The spot market is where securities are sold for cash and delivered immediately, whereas forward markets (or derivative markets) the delivery date is different from the negotiation date.

The spot market is where securities are sold for cash and delivered immediately, whereas forward markets (or derivative markets) the delivery date is different from the negotiation date.

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Which of the following is a hedging instrument? _____

View Explanation

Log in for full answers

Similar Questions

We are able to sell or go short futures and forwards, even when we don't own them, because they are derivatives. This means a contract is created each time a buyer and seller make a new transaction.

From a financial standpoint, futures are virtually identical to forwards

The main difference between forward and futures contracts is that:

Part 1Financial instruments with returns tied to previously issued securities are​ called:Part 2 A. financial derivatives B. reversible bonds C. hedge securities D. convertible bonds

Which market involves the trading of derivative securities?

The spot market is where securities are sold for cash and delivered immediately, whereas forward markets (or derivative markets) the delivery date is different from the negotiation date.

The spot market is where securities are sold for cash and delivered immediately, whereas forward markets (or derivative markets) the delivery date is different from the negotiation date.

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

Part 1Financial instruments with returns tied to previously issued securities are called:Part 2 A. financial derivatives B. reversible bonds C. hedge securities D. convertible bonds