A hedge is
A) a financial strategy that reduces the change of suffering losses arising from foreign exchange risk.
B) an exchange rate arrangement in which a country pegs the value of its currency to the exchange value.
C) the possibility that changes in the value of a nation's currency will result in variations in the market value of assets.
D) active management of a floating exchange rate on the part of a country's government.

Question

Quizplus · Accepted Answer

A hedge is a financial strategy that is used to reduce the risk of suffering losses due to unforeseen changes in market conditions or foreign exchange rates. A hedge generally involves taking a position in a financial instrument that is designed to offset the potential losses that may arise from an existing position or asset. In the context of foreign exchange risk, businesses and investors often use currency hedges to protect themselves against fluctuations in exchange rates.

A Hedge Is