When a buyer locks in an exchange rate and avoids the risk of currency fluctuations, it is called:
A)the spot market.
B)the gray market.
C)vertical purchasing.
D)currency hedging.
E)factoring.

Question

Quizplus · Accepted Answer

Currency hedging is the process by which an investor or business locks in an exchange rate to avoid the risk associated with the fluctuation of foreign currency values. This can be done through various financial instruments such as futures contracts, options, and forward contracts, allowing the buyer to protect against potential losses due to currency value changes.

When a Buyer Locks in an Exchange Rate and Avoids