In international finance, hedging indicates:
A) not being able to make a commitment to buy or sell.
B) delaying a purchase of foreign exchange, hoping the price will fall.
C) simultaneously buying several currencies to ensure that at least one will rise in value.
D) avoiding risk of loss by offsetting an obligation to buy a foreign currency by locking in a contract to sell it at the same time.

Question

Quizplus · Accepted Answer

Hedging in international finance refers to avoiding the risk of loss by offsetting an obligation to buy a foreign currency by locking in a contract to sell it at the same time. This can be achieved through various financial instruments such as forward contracts, options, and futures contracts. By hedging, companies and investors can protect themselves against adverse movements in exchange rates and ensure a certain level of certainty in their financial transactions.

In International Finance, Hedging Indicates