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Statistical technique for ascertaining

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LT used currency futures and currency options to hedge against exchange risk.

a. Suggest at least one statistical technique for ascertaining whether LT was correctly hedging against exchange risk while using these derivative contracts.

b. Explain how the statistical technique you suggest helps in determining that the hedging is being correctly implemented.

c. If correlation (unhedged cashflows, derivative cashflows) is negative, will variance (unhedged cashflows) be greater than OR less than variance (hedged cashflows)?

Reference no: EM133071548

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