14. Pear, Inc. is a manufacturer that is heavily dependent on plastic parts shipped from Malaysia. Pear wants to hedge its exposure to plastic price shocks over the next 6 months. Futures contracts, however, are not readily available for plastic. After some research, Pear identifies futures contracts on other commodities whose prices are closely correlated to plastic prices. Futures on Commodity A have a correlation of 0.70 with the price of plastic, and futures on Commodity B have a correlation of 0.80. The price of plastic Futures on both Commodity A and Commodity B are available with 6-month and 9-month expiration. Ignoring liquidity considerations, which contract would be the best to minimize basis risk? 14 (a) Futures on Commodity A with 6 months to expiration (b) Futures on Commodity B with 6 months to expiration (c) Futures on Commodity A with 9 months to expiration (d) Futures on Commodity B with 9 months to expiration

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Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.