Scenario: Trader's Paradise
Trader's Paradise is a global merchant that sells a variety of products. The company operates in forty-eight different countries (some developed, some developing) and some former communist countries. The company faces substantial risks given the differing conditions in foreign exchange markets.
-To insure against potential losses that result from adverse changes in exchange rates,Trader's Paradise should use currency ________.

Question

Quizplus · Accepted Answer

To insure against potential losses that result from adverse changes in exchange rates, Trader's Paradise should use currency hedging. Hedging is a risk management strategy that involves reducing or offsetting the risk of adverse price movements in an asset or investment. Currency hedging allows Trader's Paradise to lock in a specific exchange rate for future transactions, thereby reducing their exposure to fluctuations in foreign currency markets. Swaps, speculation, and arbitrage are not appropriate as they do not necessarily involve reducing or offsetting the risk of adverse price movements in foreign currency markets.

Scenario: Trader's Paradise Trader's Paradise Is a Global Merchant That Sells a Variety