Understanding and applying currency hedging forward contracts

Currency hedging forward contracts are really very simple. They allow either individuals or businesses with exposure to currency risk to protect themselves from adverse moves in the foreign exchange market.

The main thing to consider when looking at hedging currency exposure with forward contracts is your appetite for risk.

If you are very risk-averse and like to budget precisely then a forward contract is probably the most effective way to hedge. However, if you are not averse to taking some risk on your currency exposure there are other currency hedging tools that can be used.

You may also be interested in these sections:

  • Compare currency brokers
  • What are currency forwards?
  • Currency forward quotes
  • FX forward pricing
  • Currency forward rates
  • Currency forward contract pricing formula
  • Forward exchange contract advantages and disadvantages
  • Advantages and disadvantages of future contracts
  • Advantages and disadvantages of forward contracts and currency options
  • Advantages and disadvantages of option contracts
  • Advantages and disadvantages of money market hedge
  • Business risks of forward contracts
  • Advantages of futures and forwards
  • Currency hedging forward contracts