Individuals and corporations buy or sell forward currencies as a means of hedging exchange rate exposure. Essentially, the process involves simultaneously selling the currency expected to appreciate in value and buying the currency expected to depreciate.

Question

Quizplus · Accepted Answer

Hedging exchange rate exposure typically involves buying the currency expected to appreciate and selling the currency expected to depreciate to protect against unfavorable exchange rate movements.

Individuals and Corporations Buy or Sell Forward Currencies as a Means