Question

why might a company want to hedge its balance sheet exposure? what is the paradox associated with hedging balance sheet exposure?

Answer 1

The paradox in hedging balance sheet exposure is that, by agreeing to receive or deliver foreign currency in the future under a forward contract, a transaction exposure is created.

A paradox is a logically self-contradictory announcement or a assertion that runs contrary to at least one's expectation.[1][2] it's far a declaration that, no matter apparently legitimate reasoning from genuine premises, results in a reputedly self-contradictory or a logically unacceptable end.[3][4] A paradox usually entails contradictory-but-interrelated factors that exist simultaneously and persist through the years.[5][6][7] They result in "chronic contradiction among interdependent factors" leading to an enduring "cohesion of opposites".

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