Discuss CIPS L5M2 Exam Topic 4 Question 60

A financial instrument used by airlines to fix the price of fuel over a period of time is known commonly as a what?

Acommodity

Bswap

Cexchange

Dhedge

Suggested Answer: B

This is a 'swap' and is explained on p.94. This is a type of 'hedging' but there is no such thing as 'a hedge'. For a more in-depth look at Swaps see: https://www.mercatusenergy.com/blog/bid/77634/an-introduction-to-airline-fuel-hedging-strategies-swaps

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18 comments · newest first

Gaynell 11 months ago

Surprised people don't know this one!

Jenelle 11 months ago

Wait, isn't it just a contract?

Monroe 11 months ago

I thought it was a commodity.

Paola 11 months ago

Definitely a hedge, right?

Brandee 11 months ago

It's called a swap!

Anthony 12 months ago

I’m leaning towards "hedge" since it relates to risk management, but I could be mixing it up with other terms we studied.

Lashawn 12 months ago

I feel like "commodity" could be a possibility too, but it seems too broad for this specific context.

Alease 1 year ago

I remember practicing a question about hedging fuel costs, but I can't recall if that's the right term here.

Leonida 1 year ago

I think it might be a swap, but I'm not entirely sure. We covered this in class, and it was a bit confusing.

Izetta 1 year ago

Ugh, I'm drawing a blank on this one. I know it has something to do with airlines and fuel prices, but I can't recall the exact terminology. I'll have to make an educated guess and go with "commodity" since that sounds related to the fuel market.

Zoila 1 year ago

Okay, let me see... I remember learning about this in class. I believe the term is a "swap" where the airline locks in a fixed fuel price over a period of time. I'm pretty confident that's the right answer.

Lynda 1 year ago

Hmm, I'm not totally sure about this one. I know airlines use some kind of financial instrument to manage fuel costs, but I can't remember the specific term for it. I'll have to think this through carefully.

Jacquelyne 1 year ago

This one seems pretty straightforward. I think the answer is a "hedge" since airlines use financial instruments to fix the price of fuel over time.

Shalon 1 year ago

I'm not sure, but I think it could also be B) swap.

Theodora 1 year ago

I agree with Albina, hedging makes sense for airlines to manage fuel costs.

Albina 1 year ago

I think the answer is D) hedge.

Eric 1 year ago

I'm pretty sure it's D) hedge. Airlines use fuel hedges to manage their fuel costs and budget more effectively.

Tegan 1 year ago

↳ replying to Eric

I think you're right, airlines use fuel hedges to protect themselves from price fluctuations.

CIPS L5M2 Exam - Topic 4 Question 60 Discussion