An individual who plans to take a foreign vacation could hedge the risk of converting into the foreign currency by selling foreign currency futures.

Question

Quizplus · Accepted Answer

Selling foreign currency futures would hedge against a decline in the foreign currency's value, not the risk of needing more of the domestic currency to buy the foreign currency. To hedge against the risk of the foreign currency becoming more expensive, one would buy foreign currency futures.

An Individual Who Plans to Take a Foreign Vacation Could