The correct answer is A. Open positions in a currency.

According to Saunders, the four types of FX trading activities are:

1. Open positions in a currency – This is the most direct source of FX risk exposure because the bank has a net long or short position in a currency and bears the full risk of adverse exchange rate movements.
2. Purchase and sale of currencies for hedging purposes – These are offsetting positions designed to reduce FX risk.
3. Purchase and sale of currencies to complete international transactions – Customer-driven transactions, generally hedged or matched.
4. Facilitating positions in foreign real and financial investments – These are typically offset by corresponding liability positions.

Open (unhedged) positions are speculative in nature and represent the primary source of FX trading risk.