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Foreign Exchange Derivatives

In: Derivatives Applications in Asset Management

Author

Listed:
  • Frank J. Fabozzi

    (Johns Hopkins University’s Carey School of Business)

  • Gueorgui S. Konstantinov

    (Senior Portfolio Manager of Fixed Income & Currencies)

  • Suprita Vohra

    (Financial Professional Specializing in Foreign Exchange and Interest Rate Derivatives)

Abstract

Foreign exchange (FX) derivatives are critical tools for managing currency risk and navigating the complexities of global financial markets. This chapter explores foundational FX derivatives, including forwards, futures, options, and swaps, alongside advanced instruments like exotic and cross-rate derivatives. While forwards and swaps offer tailored solutions for hedging currency exposure, futures and options provide transparency and liquidity through standardized exchange-traded structures. Exotic derivatives, such as range forwards and barrier options, cater to unique hedging or speculative needs, while cross-rate derivatives enable efficient risk management across non-domestic currency pairs. The chapter emphasizes the importance of liquidity, cost, and counterparty considerations in choosing the appropriate derivative, providing a comprehensive understanding of how these instruments enhance portfolio management. By addressing diverse currency risks, FX derivatives play a vital role in mitigating uncertainty and optimizing financial outcomes in a globalized economy.

Suggested Citation

  • Frank J. Fabozzi & Gueorgui S. Konstantinov & Suprita Vohra, 2025. "Foreign Exchange Derivatives," Springer Books, in: Frank J. Fabozzi & Marielle de Jong (ed.), Derivatives Applications in Asset Management, chapter 0, pages 67-85, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-86354-7_4
    DOI: 10.1007/978-3-031-86354-7_4
    as

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