A "disaster hedge" against adverse currency movements can be obtained with a ______.
A) currency forward
B) currency future
C) money market hedge
D) currency option
E) currency swap

Question

Quizplus · Accepted Answer

A currency option provides the buyer with the right, but not the obligation, to buy or sell a currency at a predetermined exchange rate at a future date. This can act as a hedge against adverse currency movements as the buyer has the option to choose not to exercise the option if the exchange rate moves in their favor.

A "Disaster Hedge" Against Adverse Currency Movements Can Be Obtained