A firm that expects to receive pound sterling in ninety days could utilize a forward short position to protect its interests if the firm's management felt that the pound was set to increase in value.

Question

Quizplus · Accepted Answer

A forward short position is used to protect against a potential decrease in the value of a currency. If the firm expects the pound to increase in value, it would not utilize a forward short position. Instead, it may choose to delay the receipt of the pound or consider a forward long position to capitalize on the expected increase in value.

A Firm That Expects to Receive Pound Sterling in Ninety