Currency risk hedging
Currency risk hedging is the reduction of losses from exchange-rate fluctuations by means of financial instruments (forwards, futures, options, swaps) that lock in the future rate for settlements under the contract.
Hedging matters when a deal has a long cycle: the rate on the payment date may differ greatly from the rate on the contract date. The instrument is chosen to match the settlement terms and currency.
We will factor currency risks into the planning of payments and clearance.
Related terms
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