Question: Explain how companies can hedge risks in their operating costs by using each of the following instruments. Hypothetical examples are required. Futures and forward contracts

Explain how companies can hedge risks in their operating costs by using each of the following instruments. Hypothetical examples are required.

  1. Futures and forward contracts

  2. Option contracts

  3. Swap contracts

  4. Buying one asset and selling another. What is the hedge ratio and how is it determined?

  5. Buying one asset and selling another. What is the hedge ratio and how is it determined?

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