Which of the following is a vehicle for controlling exchange rate risk?

Question

Quizplus · Accepted Answer

A currency swap is a commonly used tool for controlling exchange rate risk. It involves the exchange of one currency for another at an agreed-upon exchange rate, with an agreement to reverse the transaction at a later date. This can help to mitigate the risk of currency fluctuations, as it locks in an exchange rate for a specific period of time. The other options listed (purchase of a cross-rate index, purchase of a LEAP, and purchase of a spot-rate index) do not directly involve the exchange of currencies and are not typically used as tools for controlling exchange rate risk.

Which of the Following Is a Vehicle for Controlling Exchange