An FX swap transaction involves exchanging principal and interest payments in different currencies, typically combining a spot transaction with a forward contract. However, contrary to statement C, FX swaps are generally used to hedge against exchange rate risk rather than generating more of it. Thus, the incorrect statement is that FX swaps generate more exchange rate risk than simple forward transactions.
[References:The characteristics and purposes of FX swaps are detailed in the "How Finance Works" document, which explains their common uses and associated risks., ]
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