1) Interest rates may increase as the Federal Reserve fights inflation.

2) Credit risk may increase as US economic growth slows.

3) US equities may decline as profit margins decline due to inflation, revenue growth slows as the economic growth slows, and market discount rates increase as interest rates increase.

4) Emerging markets equities are especially at risk if the US dollar appreciates in value and emerging markets currencies depreciate in value.

For each of these four worries, recommend a derivatives transaction to hedge the risk. (

a) Name the type of derivative, (b) state whether you will be going long (purchase) or short (sell), and (c) explain what risk you are hedging.