AAA Oil is an oil refining company. As an oil refiner, it purchases crude oil from drillers and refines the crude into multiple distillates on which it competes with a few other producers.

1. What are the market risks that AAA Oil has exposure to? Identify the direction of the exposures. Why does it have these exposures? How are the exposures translatable to the Income Statement?
2. Which of these exposures does it make sense for AAA to have a Tactical view? Why? Detail the circumstances that would drive AAA to initiate a tactical hedge.

Answer rating: 100% (QA)

AAA Oil is exposed to several market risks due to its operations in the oil refining industry 1 Commodity Price Risk AAA Oil purchases crude oil which ... View the full answer