Which of the following are strategies that can be used to minimize transaction exposure?
A) Hedging in the forward exchange market.
B) Hedging in the money market.
C) Hedging in the currency futures market.
D) All are strategies used to minimize transaction exposure.

Question

Quizplus · Accepted Answer

All of the given strategies (hedging in the forward exchange market, money market, and currency futures market) can be used to minimize transaction exposure. When companies engage in foreign transactions and are exposed to fluctuations in foreign exchange rates, they can use any of these strategies to reduce their risk and uncertainty. Hedging in the forward exchange market involves setting a price now for a future exchange involving a specific currency, while hedging in the money market involves borrowing or lending funds in different currencies to take advantage of interest rate differentials. Hedging in the currency futures market involves trading standardized contracts at a predetermined price and date in the future. By using any of these strategies, companies can reduce their exposure to transaction risk and better manage their cash flows.

Which of the Following Are Strategies That Can Be Used