Hedging currency risks

[sadiksojib35]

A complex financial transaction that requires preparation and support. Let's consider the features of this instrument:
Hedging requires significant financial investments, which makes this instrument less attractive to small companies and retail investors. It is important that the hedging costs do not exceed the amount of possible risks, otherwise the use of the instrument does not make sense.
The company may also refuse to hedge if, when assessing the effectiveness, it considers the risk to be acceptable and not threatening operational activities. Shareholders may sanction a ban on hedging, since algeria whatsapp number data they are ready to accept these risks consciously and consider the currency risk as a favorable factor for the company's value. For example, if the company receives revenue in foreign currency and spends funds on production in rubles. In the event of a weakening of the national currency, the company can use the currency risk to its advantage.


Futures contract
These contracts are similar to forwards, but are traded on the exchange. They are standardized in quantity and duration, which makes them more liquid and accessible to traders.



Swap
These are agreements between two companies to exchange currencies at a fixed rate. This instrument is especially popular when repaying a loan in foreign currency.