When a firm insures itself against foreign exchange risk,it is said to be engaging in _____.

Question

Quizplus · Accepted Answer

When a firm insures itself against foreign exchange risk, it is engaging in hedging. Hedging involves taking a position, such as buying or selling currency, to offset the potential losses from adverse currency movements. It is a risk management strategy used by companies to protect themselves from currency fluctuations. The other options - currency speculation, carry trade, currency swap, and arbitrage - involve taking a position in the currency markets with the aim of making a profit.

When a Firm Insures Itself Against Foreign Exchange Risk,it Is