A gold producer wants to hedge his loses attributable to a fall in the price of gold for his current gold currency. This is an example of:
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A. B. C. D.B
The correct answer is B. Commodity Swaps.
A commodity swap is a financial contract where two parties agree to exchange cash flows based on the price of a commodity, such as gold. The purpose of a commodity swap is to hedge against price fluctuations in the commodity, thereby reducing risk.
In the given scenario, the gold producer wants to hedge against losses that may result from a fall in the price of gold. By entering into a commodity swap, the gold producer can receive a fixed price for their gold, thereby protecting them from potential losses if the price of gold falls.
Currency swaps and interest rate swaps are not applicable in this scenario. Currency swaps involve exchanging cash flows denominated in different currencies, while interest rate swaps involve exchanging cash flows based on different interest rates.
Therefore, the correct answer is B. Commodity Swaps.