Forwards, futures and options are examples of derivatives that can be used to hedge against foreign currency risk exposure. Group of answer choicesTrueFalse

Which term defines using currency derivatives to reduce potential currency risks due to currency exchange rate movement that could lead to losses for a firm?SpeculationLong positionShort positionHedging

Which of the following is NOT an advantage of using futures contracts to hedge an exposure compared to using forward contracts to hedge the same exposure?A.Futures have very low transaction costs.B.Futures generally have more liquid markets.C.Futures generally offer lower counter-party risk.D.Futures are available on a greater range of products.

The short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates is known as: Select one: a. Currency risk mitigation. b. Currency hedging. c. Currency arbitrage. d. Currency speculation.

An importer who must pay in three months would hedge by _____ the foreign currency forward. The importer is concerned with _____ of the foreign currency.Group of answer choicesbuying; a depreciationselling; an appreciationbuying; an appreciationselling; a depreciation

Derivatives and other structured financial products are generally used for positive, risk-reduction purposes. For example, to secure the price of a commodity which is to be "bought" at a future date, but at a price that is set today. However, some academics and economic commentators view these as dangerous and irresponsible innovations in the world of international banking and global financial services.Traders in these structured financial products are able to make large bets on the change in price of commodities or currencies and only need pay a small up-front deposit. Such traders can accumulate huge exposure to losses which could be devastating to their employers.Sceptics believe that one day such products could lead to financial ruin for a bank if one or more derivatives traders chase their losses over an extended period of time. In summary, complex, structured financial products are a necessary evil to meet the demands of modern-day capitalist societies.The media has portrayed derivatives as bad financial products.TrueFalseCannot Tell