FX Risk Exposure of an FI Essentially Relates to Which

question 32

Multiple Choice

FX risk exposure of an FI essentially relates to which of the following activities?

• A)Purchase and sale of foreign currencies to allow customers to participate in and complete international commercial trade transactions.
• B)Purchase and sale of foreign currencies to allow customers to take positions in foreign real and financial investments.
• C)Purchase and sale of foreign currencies for hedging purposes to offset customer exposure in any given currency.
• D)Purchase and sale of foreign currencies for speculative purposes through forecasting or anticipating future movements in FX rates.
• E)None of the above.

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Definitions:

Oversalience Effect

The tendency to overattribute significances to certain stimuli or information over others, which may not be justified.

Central and Peripheral

This refers to the two routes to persuasion proposed by the Elaboration Likelihood Model: the central route, which involves careful and thoughtful consideration of the arguments (content of the message), and the peripheral route, which involves reliance on cues outside the content of the message.

Systematic and Heuristic Processing

Two modes of thinking where systematic processing involves deliberate, analytical evaluation of information, while heuristic processing is based on automatic, quick judgments.

Implicit and Explicit Reception

Implicit and explicit reception encompasses the ways in which individuals subconsciously and consciously process information, attitudes, or cues within their environment.