Which of the following is the most unlikely strategy for a UK firm that will be purchasing Swiss francs in the future and desires to avoid exchange rate risk (assume the firm has no offsetting position in francs)?
A) Purchase a call option on francs.
B) Obtain a forward contract to purchase francs forward.
C) Sell a futures contract on francs.
D) All of the above are appropriate strategies for the scenario described.

Question

Quizplus · Accepted Answer

Selling a futures contract on francs would not protect against exchange rate risk for a firm needing to purchase francs, as it would benefit from a decline in the franc's value, which is contrary to the firm's need to secure francs at a stable or favorable rate.

Which of the Following Is the Most Unlikely Strategy for a UK