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.
-If Trader's Paradise purchases and sells the euros simultaneously in different markets for profit,it would be engaging in currency ________.

Question

Quizplus · Accepted Answer

Engaging in simultaneous purchase and sale of a currency in different markets for profit is known as arbitrage. This is because the trader is taking advantage of price discrepancies between different markets to make a profit. Currency swaps involve exchanging one currency for another to manage risk or interest rate exposure. Currency speculation involves buying or selling a currency with the hope of making a profit from changes in exchange rates. Currency hedging involves taking actions to offset the potential risks associated with fluctuations in exchange rates.

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