Financial Risk Manager Part 1
Get started today
Ultimate access to all questions.
Comments
Loading comments...
Ultimate access to all questions.
A financial education website recently received feedback identifying inaccuracies in an article about foreign exchange (FX) risks faced by traders and the strategies available to mitigate these risks. Review the statements presented below and determine which one contains incorrect information that should be removed from the article.
A
Transaction exposure arises from the effect that exchange rate fluctuations have on a company's obligations to make or receive payments denominated in foreign currency.
B
Translation exposure arises from the effect of currency fluctuations on a company's consolidated financial statements, particularly when it has foreign subsidiaries.
C
Economic exposure arises from the effect of unexpected currency fluctuations on a company's future cash flows and market value.
D
The main types of Fx risks are transaction risk, translation risk and economic risk. which are effectively hedged with FX swaps, FX forwards and FX options.