Question

Omega, inc., a u.s.-based firm entered into an agreement with another party to exchange currency and execute the deal at a specific date in the future. what is omega, inc. engaging in when it insures itself against foreign exchange risk? arbitrage hedging carry trade currency speculation currency swap

Answer 1

This would be an example of hedging. By doing so, the company is making sure that, even if the wager in the exchange goes south and they would stand to lose funds in the process, they would have at least some kind of protection against such an occurrence.