Answer:
a) operational hedging provides a more stable long-term approach than does financial hedging
Explanation:
These are the options for the question;
a) operational hedging provides a more stable long-term approach than does financial hedging.
b) financial hedging, when instituted on a rollover basis, is a superior long-term approach to operational hedging.
c) since they both have the same goal, stabilizing the firm's cash flows in domestic currency, they are fungible in use.
d) none of the above
Hedging in finance can be regarded as the process of utilizing of financial instruments as well of market strategy so that any risk as a result of adverse price movement can be offset. In domain of finance literature, operational hedging can be regarded as course of action that brings about the exposure of the risk of a particular firm through operational activities or non-financial instruments. Financial hedging involves management of price risk through the activities of financial derivative so that the price movement can be offset. It should be noted that With regard to operational hedging versus financial hedging operational hedging provides a more stable long-term approach than does financial hedging.
