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Off-Balance-Sheet Hedging Involves Making Changes in the On-Balance-Sheet Assets and Liabilities

question 53

True/False

Off-balance-sheet hedging involves making changes in the on-balance-sheet assets and liabilities to protect the FI's profits from FX risk and taking positions in forward or other derivative securities to hedge FX risk.


Definitions:

Marginal Efficiency

The expected profitability of investing in additional units of capital, influencing a firm's decision to invest based on future returns.

Net Investment

The total spending on new capital minus the depreciation on existing capital, indicating the growth of a company's or nation's capital stock.

Inventory Investment

The stock of goods or merchandise kept by a business with the intent to sell it for profit.

Depreciation

A measure of the decrease in value of an asset over time, often due to wear and tear or obsolescence.

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