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问题如下：

The strategy that hedges Papadopoulos’s BRL exposure is most likely:

选项：

Strategy 1.

Strategy 2.

Strategy 3.

解释：

Correct Answer: B

Papadopoulos has a long exposure to BRL in three months. This position can be hedged by selling BRL against USD, or in other words, buying USD, the base currency. A long call on BRL/USD will protect against base currency appreciation.

A short position in BRL/USD is selling USD and buying BRL against USD, the base currency. This will not hedge Papadopoulos’s position. In fact, it will increase the exposure to BRL.

A variance swap can hedge the risk against the currency pair’s volatility, but the appropriate position to implement in this situation is a long position, not a short position.

A long position in a BRL/USD variance swap will protect the investor from unexpected movements in the currency due to short-term volatility, whereas a short position will increase the exposure to the short-term volatility.