24-38 A swap used to hedge against exchange rate risk from mismatched currencies on assets and liabilities is
A)a commodity swap.
B)a credit swap.
C)a currency swap.
D)an equity swap.
E)an interest rate swap.

Question

Quizplus · Accepted Answer

A currency swap involves exchanging a set amount of one currency for another currency. In a scenario where a company has assets denominated in one currency and liabilities denominated in another currency, they can use a currency swap to hedge against exchange rate risk. This involves exchanging the cash flow from the assets in one currency for the cash flow of the liabilities in another currency, effectively matching the currency of the assets and liabilities.

24-38 a Swap Used to Hedge Against Exchange Rate Risk