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Hedgers use the futures markets to reduce price risk. Which of the following are examples of...

Hedgers use the futures markets to reduce price risk. Which of the following are examples of hedging? Multiple Choice

An equities investor sells a share price index futures contract.

An Australian exporter with USD receivables buys an AUD futures contract on a US exchange.

All of the answers provided.

A borrower sells a Treasury bond futures contract.

A borrower sells a Treasury bond futures contract.

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Answer #1

Both the option 1 & 2 are example of Hedging as the Equities investor will have to short the future to hedge the Equities.Also the an exporter who will receive USD in future will have to sell USD to buy it home Currency So he will Buy AUD future to to buy the AUD in the future when USD will be received.

Therefore, Option is correct.

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