There are many arguments "for" and "against" hedging foreign currency exchange risk. Several of those arguments are listed below. There are also some false statements listed below.

A. Shareholders can diversify the risk on their own.

B. Currency hedging does not increase firm value.

C. Reduced variability of cash flows improves planning accuracy and reduces cash needs.

D. Currency hedging reduces risk and increases firm value.

E. Management better understands the firm's currency risks.

F. Agency issues (managers may hedge the wrong risks).

G. Improved ability to avoid the costs of financial distress

1.Give three arguments against hedging foreign exchange risk

2.Give three arguments for hedging foreign exchange risk.