Which of the following is an exchange risk management technique through which the firm contracts with a third party to pass exchange risk onto that party, via instruments such as forward contracts, futures, and options? a. Risk Transfer b. Risk Avoidance c. Risk Adaptation d. Diversification

Which of the following is an exchange risk management technique through which the firm contracts with a third party to pass exchange risk onto that party, via instruments such as forward contracts, futures, and options? a. Risk Transfer b. Risk Avoidance c. Risk Adaptation d. Diversification

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 10MC

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Concept explainers

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.

Question

Which of the following is an exchange risk management technique through which the firm
contracts with a third party to pass exchange risk onto that party, via instruments such as forward
contracts, futures, and options?

Risk Transfer

Risk Avoidance

Risk Adaptation

Diversification

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