The three main types of foreign exchange risk are
A) operating, transaction, and translation.
B) translation, accounting, and operating.
C) transaction, accounting, and translation.
D) operating, currency, and market.

Question

Quizplus · Accepted Answer

The three main types of foreign exchange risk are operating, transaction, and translation. Operating risk arises from a company's ongoing business activities in foreign currency, transaction risk arises from foreign currency transactions, and translation risk arises from converting the financial statements of foreign subsidiaries into the parent company's currency. Choice B and C are incorrect as accounting is not a type of foreign exchange risk and market or currency risk is not one of the three main types.

The Three Main Types of Foreign Exchange Risk Are