The transaction exposure of two inflow currencies is offset when the correlation between the currencies is high.

Question

Quizplus · Accepted Answer

The transaction exposures of two inflow currencies cannot be completely offset even if the correlation between them is high because their individual exchange rates can still fluctuate independently due to other factors such as economic and political events. However, having an offsetting exposure can help to reduce the overall risk.

The Transaction Exposure of Two Inflow Currencies Is Offset When