1) Define spot, forward, and swap transactions in the foreign exchange market and give an example of...
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Question:
1) Define spot, forward, and swap transactions in the foreign exchange market and give an example of how each could be used.
2) The Big Mac is considered a good candidate for the application of the law of one price and measurement of under or overvaluation of a currency. Develop an argument as to why this is a good idea.
3) Does foreign currency exchange hedging both reduce risk and increase expected value? Explain, and list several arguments in favor of currency risk management and several against.
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