A swap used to hedge against exchange rate risk from mismatched currencies on assets and liabilities is
A)a commodity swap.
B)a credit swap.
C)a currency swap.
D)an equity swap.

Question

Quizplus · Accepted Answer

A currency swap involves two parties exchanging currency for a specified period of time, with the agreement to reverse the transaction at a later date. This is often used to manage currency mismatches, such as when a company has assets denominated in one currency and liabilities in another. By swapping the currencies, they can protect themselves against fluctuations in exchange rates. Commodity, credit, and equity swaps are not specifically designed to hedge against currency risk.

A Swap Used to Hedge Against Exchange Rate Risk from Mismatched