Financial Risk Manager Part 1
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An editorial team at a financial education website received a complaint that there were errors in an article. The article in question covers the topic of different types of FX risks that traders face and how to hedge those risks. Which of the following statements should be deleted 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.