The use of forward exchange contracts encourages speculation.

Question

Quizplus · Accepted Answer

Forward exchange contracts are typically used as a risk management tool to hedge against fluctuations in currency exchange rates. They are not generally used for speculation. However, it is possible for some investors or traders to use forward contracts for speculative purposes. Overall, the main purpose of forward contracts is to manage risk rather than encourage speculation.

The Use of Forward Exchange Contracts Encourages Speculation