As a foreign exchange hedging tool, options ________.
A) provide the right to buy or sell an amount of foreign currency
B) allow the trading of one interest rate stream for another
C) permit firms to change the interest rate structure of their assets/liabilities
D) represent an obligation to buy or sell an amount of foreign currency

Question

Quizplus · Accepted Answer

Options provide the right, but not the obligation, to buy or sell a specific amount of foreign currency at a pre-determined exchange rate, making them a useful tool for hedging foreign exchange risk.

As a Foreign Exchange Hedging Tool, Options ________