If you have a long position in a foreign currency, you can hedge with:
A)A short position in an exchange-traded futures option
B)A short position in a currency forward contract
C)A short position in foreign currency warrants
D)Borrowing (not lending) in the domestic and foreign money markets

Question

Quizplus · Accepted Answer

A short position in a currency forward contract allows the investor to sell the foreign currency at a predetermined exchange rate in the future, thus protecting against potential losses due to currency fluctuations. This is the most common method of hedging a long position in a foreign currency. The other options listed also offer some hedging benefits, but may not be as effective or accessible to all investors.

If You Have a Long Position in a Foreign Currency