Asked by Deviu Bhandari on Jun 30, 2024
Verified
The purpose of hedging in forward exchange markets is to limit losses resulting from unexpected future changes in spot exchange rates.
Hedging
A risk management strategy used to offset potential losses in investments by taking an opposite position in a related asset.
Spot Exchange Rates
Spot exchange rates are the current exchange rates at which currencies can be traded immediately.
- Acknowledge the multiple approaches that a company can adopt to manage the uncertainties tied to foreign exchange.
Verified Answer
ZK
Zybrea KnightJul 04, 2024
Final Answer :
True
Explanation :
Hedging in forward exchange markets involves entering into a contract to buy or sell currency at a fixed price and date in the future, thus reducing the risk of losses due to unpredictable changes in spot exchange rates.
Learning Objectives
- Acknowledge the multiple approaches that a company can adopt to manage the uncertainties tied to foreign exchange.
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