In relation to potential FX exposures,historical data suggests to manage FX exposures:
A) all importers, exporters, lenders and borrowers in capital markets tend to use currency futures contracts and cross-currency swaps.
B) in commercial trade transactions importers and exporters use currency futures contracts and in capital market transactions lenders and borrowers use forward exchange contracts.
C) in commercial trade transactions importers and exporters typically use forward exchange contracts and currency options while in capital markets transactions lenders and borrowers tend to use currency futures contracts and cross-currency swaps.
D) All importers and exporters in trade as well as lenders and borrowers in capital market transactions tend to use forward exchange contracts and currency options.

Question

Quizplus · Accepted Answer

Historical data suggests that importers and exporters typically use forward exchange contracts and currency options in commercial trade transactions, while lenders and borrowers tend to use currency futures contracts and cross-currency swaps in capital market transactions. This makes choice C the most accurate option. Choice A is incorrect because it states that all importers, exporters, lenders, and borrowers use currency futures contracts and cross-currency swaps, which isn't entirely true. Choice B is incorrect because it wrongly associates futures contracts with capital market transactions and forward exchange contracts with commercial trade transactions. Choice D is incorrect because it states that all parties involved use forward exchange contracts and currency options, which is not the case.

In Relation to Potential FX Exposures,historical Data Suggests to Manage