One argument why exchange rate risk is irrelevant to corporations is that shareholders may be able to hedge this risk individually.

Question

Quizplus · Accepted Answer

This argument is based on the principle of financial theory that if shareholders can undertake an action as cheaply and effectively as the firm, then it is not necessary for the firm to do so. In this case, if shareholders can hedge exchange rate risk on their own, the firm does not need to engage in hedging activities, making the risk irrelevant at the corporate level.

One Argument Why Exchange Rate Risk Is Irrelevant to Corporations