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What is forex hedging?
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30th Nov 2009 by David Becker
The term hedging is the process of mitigating the risks associated with some form of risk. Forex hedging is the process of mitigating the foreign exchange risk that a firm or individual might incur. For example, if an investor in the US purchase European stocks and the market moved higher, the investor would be exposure to Euro currency risk. Since the profits are in Euros the investor could sell Euros and buy the US dollar to hedge his risks. Hedging in foreign exchange can be accomplished by using futures, options, forwards, swaps or ETFs.
The term hedging is the process of mitigating the risks associated with some form of risk. Forex hedging is the process of mitigating the foreign exchange risk that a firm or individual might incur. For example, if an investor in the US purchase European stocks and the market moved higher, the investor would be exposure to Euro currency risk. Since the profits are in Euros the investor could sell Euros and buy the US dollar to hedge his risks. Hedging in foreign exchange can be accomplished by using futures, options, forwards, swaps or ETFs.
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26th Nov 2009 In Forex
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Subjects: forex hedging,