Final answer:
Market equivalence is a consequence of the ability to swap one cash flow for another at zero cost. In the context of hedging, it refers to the practice of using a financial transaction to protect oneself against a risk from one's investments.
Step-by-step explanation:
Market equivalence is a consequence of the ability to swap one cash flow for another at zero cost. When it comes to hedging, market equivalence refers to the practice of using a financial transaction to protect oneself against a risk from one's investments. In this case, it would involve signing a financial contract to guarantee a certain exchange rate one year from now, regardless of the market exchange rate at that time.