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

Question

Quizplus · Accepted Answer

A currency swap is a vehicle for controlling exchange rate risk. It involves an agreement between two parties to exchange future cash flows in different currencies. This allows one party to hedge against exchange rate fluctuations by fixing the exchange rate at the time of the swap. The other options listed do not directly relate to controlling exchange rate risk. The BBSW is a benchmark interest rate, the Black-Scholes model is used for pricing options, and speculating on currency involves taking on risk rather than controlling it.

Which of the Following Is a Vehicle for Controlling Exchange