If the exposed position in a foreign currency is offset by borrowing or lending,it is referred to as a

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When the exposed position in a foreign currency is offset by borrowing or lending, it is referred to as a money-market hedge. This involves borrowing or lending in the currency that has been converted. This strategy is used to eliminate transaction risk, which is the risk of loss due to fluctuations in exchange rates. A money-market hedge is different from a forward-market hedge or spot hedge, which involve using forward contracts or spot contracts to hedge against foreign exchange risk. An interest-rate hedge involves using financial instruments to protect against fluctuations in interest rates.

If the Exposed Position in a Foreign Currency Is Offset