Exposures to currency risk that are periodic, long-term, and recurring in nature are usually best hedged with ______.
A) currency compacts
B) currency futures
C) currency options
D) currency straddles
E) currency swaps

Question

Quizplus · Accepted Answer

Currency swaps allow for periodic, long-term, and recurring hedging of currency risk. The parties involved in a currency swap agree to exchange a fixed amount of one currency for a fixed amount of another currency on agreed-upon dates. This allows for a fixed rate of exchange and mitigates the risk of currency fluctuations.

Exposures to Currency Risk That Are Periodic, Long-Term, and Recurring