Omega,Inc.,a U.S.-based firm entered into an agreement with another party to exchange currency and execute the deal at a specific date in the future.What is Omega,Inc.engaging in when it insures itself against foreign exchange risk?

Question

Quizplus · Accepted Answer

Omega, Inc. is engaging in hedging when it insures itself against foreign exchange risk. Hedging involves taking a position to offset potential losses in another position. In this case, Omega is using a currency exchange agreement to protect itself against any potential losses from fluctuations in exchange rates.

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