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If currency futures price is too low, a part of the arbitrage strategy is to borrow in the foreign currency. Why is that? a. Buying
If currency futures price is too low, a part of the arbitrage strategy is to borrow in the foreign currency. Why is that?
a. Buying futures creates a long exposure to the exchange rate risk
b. Borrowing in the foreign currency is cheaper than borrowing in the domestic currency
c. Buying futures means that the futures payoff will decline if the foreign currency appreciates
d. Buying futures creates a short exposure to the exchange rate
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