Finance · Derivatives and Risk Management
An Indian multinational company (MNC) has significant exposure to the following risks: AffairsCloud.com + 1 (I) The risk of an increase in the cost of a future borrowing six months from now. (II) The risk of a fall in the price of its equity shares being held in the short term. (III) The risk of a major currency's exchange rate moving adversely on an export receivable due in four months. Based on the functions of derivatives and the profile of its users, which combination of actions would the MNC most likely take?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1(I) Enter into an Interest Rate Swap as a fixed-rate payer; (II) Sell an Equity Future; (III) Buy a Currency Put Option✓
- 2(I) Buy an Interest Rate Future; (II) Sell an Equity Call Option; (III) Buy a Currency Call Option
- 3(I) Enter into a Forward Rate Agreement (FRA) to fix the interest rate; (II) Buy an Equity Future; (III) Sell a Currency Put Option
- 4(I) Buy a Call Option on an Interest Rate Index; (II) Sell an Equity Future; (III) Buy a Currency Put Option
Correct answer
(I) Enter into an Interest Rate Swap as a fixed-rate payer; (II) Sell an Equity Future; (III) Buy a Currency Put Option
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