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Hedging Foreign Exchange Risk

Defining Hedge. Hedge refers to an offsetting contract made in order to insulate the home currency value of receivables or payables denominated in foreign currency. Objective of hedging is to offset exchange risk arising from transaction exposure. . Types of Hedging. 1. Forward Market Hedges: use forward contracts to offset exchange rate exposure2. Money Market Hedges: use borrowing and lending in the money markets3. Hedging with Swaps: use combination of forward and money market instrum31509

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Hedging Foreign Exchange Risk

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