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The Instruments Commonly Used for Hedging

In: Exchange Rates and the Firm

Author

Listed:
  • Richard Friberg

    (Stockholm School of Economics)

Abstract

The hedge of course works by creating an offsetting exposure. If your cash flows move in one direction because of an exchange rate surprise, hedging implies that you also have a contract, the value of which moves in the opposite direction. You create an offsetting exposure. In this chapter we will introduce the most commonly used financial instruments available for hedging currency exposure. The instruments which we will explain are forwards, futures, options, and swaps. For a more comprehensive guide we refer the reader to any of the textbooks mentioned in the introduction, which typically have this as their main focus.

Suggested Citation

  • Richard Friberg, 1999. "The Instruments Commonly Used for Hedging," Palgrave Macmillan Books, in: Exchange Rates and the Firm, chapter 5, pages 33-35, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-333-98237-2_5
    DOI: 10.1057/9780333982372_5
    as

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