Which of the following is the most unlikely strategy for a U.S. firm that will be purchasing Swiss francs in the future and desires to avoid exchange rate risk (assume the firm has no offsetting position in francs)?
A) purchase a call option on francs.
B) obtain a forward contract to purchase francs forward.
C) sell a futures contract on francs.
D) all of the above are appropriate strategies for the scenario described.

Question

Quizplus · Accepted Answer

Selling a futures contract on francs does not eliminate exchange rate risk and is unlikely to be a viable strategy for a U.S. firm seeking to avoid such risk. Choices A and B are both appropriate strategies that can be used to hedge exchange rate risk, as they allow the firm to purchase francs at a known exchange rate.

Which of the Following Is the Most Unlikely Strategy for a U.S