Question

What do you mean by Hedging? Discuss the various tools of Hedging in foreign Exchange.

Answer 1

Hedging refers to strategies for minimizing the impact of fluctuations in the exchange rate. ... There are five common tools for hedging foreign exchange risk: Forwards are contracts that define the amount, date and rate of a future currency exchangebetween two parties.

Answer 2

Answer:

The most common method of hedging currency risk is through the use of hedging products, such as currency swaps, forward contracts and options. These products offset the chance of exchange rate fluctuation in different ways, therefore protecting a company's investment from the risk of losing value.