ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The forward market is especially well suited to offer hedging protection against transactions risk exposure. A forward market is an over-the-counter marketplace that sets the price of a financial instrument or asset for future delivery.

Detailed explanation-2: -11. The forward market is especially well-suited to offer hedging protection against (a) translation risk exposure.

Detailed explanation-3: -Forward market hedging protects investments, financial assets, and instruments by minimizing possible losses. Hedging is a strategy most investors use to safeguard future outcomes that will put their investment at a disadvantage.

Detailed explanation-4: -Benefits of the Forward Market It is extremely beneficial to parties who have specific commodities that they will need to exchange in the future. The forward market provides a complete hedge and attempts to eliminate various risks so that parties can protect their commitments.

Detailed explanation-5: -Forward markets facilitate the exchange of forward and futures contracts, setting the price of a delivered asset or financial instrument. Forward contract pricing is based on the difference in interest rates between two currencies being traded, particularly within FX. Otherwise, it would be based on the yield curve.