In an international trade contract involving one buyer and one seller,both parties may be exposed to exchange rate risk if the contract is denominated in a third currency.

Question

Quizplus · Accepted Answer

If the contract is denominated in a third currency, both parties will need to convert their own currencies into the third currency, making them susceptible to fluctuations in exchange rates. Thus, they will both be exposed to exchange rate risk.

In an International Trade Contract Involving One Buyer and One