Which one of the following statements concerning financial futures is correct?
A) Speculators in the currency markets are generally firms involved with international trading of goods and services.
B) Portfolio managers wishing to provide downside protection to their portfolios are the primary speculators in the financial futures markets.
C) Investors who simply play in the futures market with the hope of realizing capital gains are referred to as the hedgers.
D) International trade often is accompanied by currency hedging via financial futures.

Question

Quizplus · Accepted Answer

International trade often involves currency risk due to fluctuations in exchange rates. To manage this risk, firms engaged in international trade frequently use currency hedging through financial futures. This allows them to lock in exchange rates for future transactions, thereby reducing their exposure to unfavorable currency movements.

Which One of the Following Statements Concerning Financial Futures Is