14-50 Which of the following FX trading activities is used to hedge FX risk?
A)The purchase and sale of foreign currencies for the purpose of profiting from forecasting or anticipating future movements in FX rates.
B)The purchase and sale of foreign currencies to allow customers to partake in and complete international commercial trade transactions.
C)The purchase and sale of foreign currencies for the purpose of offsetting customer exposure in any given currency.
D)The purchase and sale of foreign currencies to allow customers to take positions in foreign real and financial investments.
E)None of the above.

Question

Quizplus · Accepted Answer

Hedging FX risk involves offsetting a customer's exposure in a given currency, which is the purpose of the purchase and sale of foreign currencies in option C. Option A is more related to speculative trading, while option B involves facilitating international commercial trade transactions. Option D is closer to international investment transactions, which are not necessarily related to FX hedging activities. Therefore, option C is the most appropriate choice for this question.

14-50 Which of the Following FX Trading Activities Is Used