Which of the following FX trading activities is used to hedge FX risk?
A)The purchase and sale of foreign currencies for the purpose of profiting from forecasting or anticipating future movements in FX rates.
B)The purchase and sale of foreign currencies to allow customers to partake in and complete international commercial trade transactions.
C)The purchase and sale of foreign currencies for the purpose of offsetting customer exposure in any given currency.
D)The purchase and sale of foreign currencies to allow customers to take positions in foreign real and financial investments.
E)None of the options.

Question

Quizplus · Accepted Answer

Hedging FX risk involves offsetting customer exposure in a given currency, which is done through the purchase and sale of foreign currencies. Therefore, option C is the correct answer. Options A, B, and D involve FX trading for different purposes, such as profiting from forecasting future movements, completing international trade transactions, and taking positions in foreign investments, respectively, but do not necessarily involve hedging FX risk. Option E is not a valid choice as one of the options must be correct.

Which of the Following FX Trading Activities Is Used to Hedge