Hedgers,mostly _____________,engage in forward contracts on the foreign exchange markets to protect the home currency value of various foreign currency-denominated assets and liabilities on their balance sheets.

Question

Quizplus · Accepted Answer

Multinational corporations often have assets and liabilities denominated in foreign currencies, which can expose them to currency risk. To mitigate this risk, they may use forward contracts on the foreign exchange market to lock in a specific exchange rate for future transactions, thereby protecting the value of their assets and liabilities in their home currency. Commercial banks and public utilities may also engage in hedging activities, but they are less likely to use foreign exchange forwards as a significant part of their hedging strategies. Speculators, on the other hand, do not use forwards for hedging purposes but instead engage in these contracts to bet on the direction of currency movements for potential profit.

Hedgers,mostly _____________,Engage in Forward Contracts on the Foreign Exchange Markets