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Discuss the risk confronting an interest rate and currency swap dealer in international Markets?
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- What do you know about arbitrage opportunity? Discuss with examples. Also, present a scenario of any type of international arbitrage if possible. If so, how would it be executed and how would market forces be affected? Does arbitrage opportunity destabilize foreign exchange markets?Does Arbitrage destabilize foreign exchange markets? Support your logic about that statementForeign exchange risk may be best defined as:a. the chance of value change in foreign exchange ratesb. the chance that the demand for your currency will dropc. the chance that exchange rates will be fixedd. the political risk posed by foreign governments
- Which of the following is the risk due to exchange rates? Business risk Financial risk Market risk Interest rate risk Purchasing power risk Exchange rate riskhow interest rate impact the foreign exchange market? how foreign exchange market impacts interest rate?Which hedging strategy uses an exchange rate agreed to today for future delivery of currency to minimize the financial institution’s risk exposure? a. Hedging with forwards. b. On balance sheet hedging. c. Off balance sheet hedging. d. Spot hedging.