FX Hedging explained

Become an expert in hedging the FX exposure !  Learn how to master the FX derivatives instruments !

There are a lot of risks related to a business, some of them are quite obvious, others are not. 

• A power break is an example of risk

• A competitor entering the market with a substitute product is another type of risk

• A big company coming to town may absorb a lot of working force causing the salaries to increase

• The bankruptcy of a supplier could cause serious purchase problems

• The bankruptcy of a big customer may endanger the company's  profitability

What happens if any of these risks take place ? How much money can you lose ? Can you quantify ? Hardly, I would say... And even if you could calculate the losses, what instruments can you use in order to protect your business ?

The first good news about the FX risk is that it can be calculated exactly. For example, if you have an exposure of one million dollars and the FX rate moves adversely by 0.05, then you could lose 50,000. Precisely !

The other good news about the FX risk is that you have a lot of instruments to protect. So, why not learn how to do it ?