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Southwest airlines hedges the cost of fuel to fly their planes.Assume that Southwest Airlines uses crude oil futures to hedge the cost of aviation fuel.Explain

Southwest airlines hedges the cost of fuel to fly their planes.Assume that Southwest Airlines uses crude oil futures to hedge the cost of aviation fuel.Explain the transaction.

Hedging aviation fuel prices using crude oil futures is called a "cross-hedge".Explain why such a cross-hedge is OK. What could be a problem with using a cross-hedge.

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