Which of the following statements is correct?
A)hedging transactions involve taking a position in a foreign currency with the aim of profiting from movements in exchange rates for that currency
B)hedging transactions can only relate to specific commitments
C)hedging transactions can relate to specific commitments or general commitments
D)hedging transactions can only relate to general commitments

Question

Quizplus · Accepted Answer

Hedging transactions can relate to both specific commitments and general commitments. The aim of a hedging transaction is to mitigate the risks of price fluctuations or exchange rate movements, in order to protect against potential losses. This can be done for both specific commitments, such as a contract to purchase goods or services in a foreign currency, or for general commitments, such as a portfolio of investments that are exposed to currency risk.

Which of the Following Statements Is Correct