A firm which might suffer a loss as a result of a decline in the value of the Japanese yen could offset part of that risk by selling Japanese yen futures.

Question

Quizplus · Accepted Answer

Selling Japanese yen futures would create a hedge against the potential loss from a decline in the value of the currency. For example, if the firm owns assets denominated in yen, such as stocks or bonds, a weakening of the yen would lead to a decrease in the value of these assets. By selling Japanese yen futures, the firm would be able to lock in a price for the yen at a future date, thus mitigating the risk of a decline in the currency's value.

A Firm Which Might Suffer a Loss as a Result