In the Context of Managing Exchange Rate Risks, Which of the Following

question 4

Multiple Choice

In the context of managing exchange rate risks, which of the following statements is true of an option?

• A) An option is similar to a forward contract that does not allow for purchase of currency from a bank.
• B) A trader uses an option to buy and sell currencies at different exchange rates on the same day.
• C) A trader planning to purchase an option is compulsorily required to couple a spot transaction with a forward transaction.
• D) Even after purchasing an option, it is not an obligation to buy a certain amount of currency at a given exchange rate.

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Definitions:

Strategic Control

A method for monitoring the execution of an organization's strategic plans and measures taken to adjust strategies when necessary.

Innovative Units

Teams or departments within an organization dedicated to the development and implementation of new ideas or technologies.

Organic

Refers to structures and processes in organizations that are flexible and adaptable, often contrasted with more hierarchical and rigid structures.

Ambidexterity

The ability to be equally proficient in using both the right and left hands, or the capacity of an organization to innovate while also maintaining efficiency in existing operations.