If Foreign Currency Exchange Rates Are Highly Positively Correlated, How

question 91

Multiple Choice

If foreign currency exchange rates are highly positively correlated, how can a FI reduce its exchange rate risk exposure?

• A)By taking net long positions in all currencies.
• B)By taking net short positions in all currencies.
• C)By taking opposing net short and net long positions in different currencies.
• D)By maximizing net FX exposure in each currency, independently.
• E)By minimizing net FX exposure in each currency, independently.

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Definitions:

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