Currency Risk Management through Currency Derivatives

Dharen Kumar Pandey
2014 Zenodo  
Risk is as old as civilization. Risk is unique because it cannot be eliminated; but managed. Globalization has led to the interdependency of nations, thus, increasing exposure to exchange rate volatility. The volatility of the exchange rates leads to currency risk in all transactions in a foreign currency. The most significant way to manage the currency risk is the use of currency derivatives. This paper not only explores the various aspects of currency risk but also provides lucid
more » ... lucid understanding of the instruments that help mitigate the currency risks. The paper has been divided into five parts. The first part deals with the basic introduction of risk and uncertainty. The second part reviews some literature on risk and risk management through derivatives. The third part deals with how the currency derivatives can be used to manage currency risk. In the fourth part, steps in currency risk management using a currency futures has been analyzed with a live example taking the spot and future prices of the USD INR currency futures traded on the National Stock Exchange. The final part is the conclusion.
doi:10.5281/zenodo.4698540 fatcat:g6x4ao6y3jethony6vhlvi2ura