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What exactly is the definition of currency hedging?
Currency hedging is also known as foreign exchange hedging. It involves a method used by companies to eliminate risk resulting from foreign exchange transactions.
Are Dow Jones Futures future contracts?
Yes. Dow Jones Futures are future contracts. This is because future contracts practically do not have an expiration date. It is also good because of the fact you can buy and sell single or bulk stock futures.
Does real cost of hedging payable with forward contract equal to nominal cost of hedging minus nominal cost of not hedging?
yes
Ask us of the following best explains what a forward contract is?
A forward contract is the simplest of the Derivative products. It is a mutual agreement between two parties, in which the buyer agrees to buy a quantity of an asset at a specific price from the seller at a future date. The Price of the contract does not change before delivery. These type of contracts are binding, which means both the buyer and seller must stay committed to the contract. This means they are bound to deliver or take delivery of the product on which the forward contract was agreed upon. Forwards contracts are very useful in hedging
Why are commodity futures contracts transferable?
Commodity future contracts are transferable (can be bought and sold), to realize a profit or loss, but the obligation in the contract remains valid.
Concept of hedging?
The concept of hedging is to reduce the risk of financial loss. Hedging originated out of the 19th century commodity markets. A hedge can include stocks, exchange-traded funds, insurance, forward contracts, swaps, and options.
What is hedging tools?
Hedging tools are those tools which helps to mitigate the risk in the market. For e.g. Future Contract, Swap, Option etc.
How does one use an index future?
An index future is a "cash-settled futures contract on the value of a particular stock market index". Index futures are used in investments, trading, and hedging.
What is a forward contract?
A customized contract between two parties to buy or sell an asset at a specified price on a future date. A forward contract can be used for hedging or speculation, although its non-standardized nature makes it particularly apt for hedging.
What is hedging in financial management terms?
If a business is exposed to a risk of any kind (interest rates, currency fluctuation, commodity prices, etc.) they can partially offset that risk by hedging. In hedging they would enter into a contract whose value will fluctuate in the opposite direction of their business risk position. If they build things from wood, they may want to buy wood future contracts. If the price of wood goes up their business costs rise but that should be partly offset by a profit on their futures contract.
What is differences between currency future and currency future contracts?
"Futures" and "Futures contracts" are the same thing.
How is translation exposure mitigated?
To minimise the risk of translation of foreign assets or liabilities, Futures Contracts could be undertaken. Such as Swaps OR through Hedging
What exactly is the definition of currency hedging?
Currency hedging is also known as foreign exchange hedging. It involves a method used by companies to eliminate risk resulting from foreign exchange transactions.
What is the meaning of HEDGE in forex trading?
Hedging is a technique used to limit exposure to or reduce risk for potential circumstances that may negatively impact a financial gain. For example, some airlines use oil futures as a hedge for changes in the price of jet fuel, effectively stabilize the price that they pay for some period of time. In foreign exchange, the term hedging is most commonly used by companies that conduct business in multiple currencies. Using exchange rate options or simple currency future contracts, these companies will protect a portion of their income (or the cost to spend local currency) once it is converted to the currency used at headquarters.Please keep in mind that there are costs associated with hedging and that it is very difficult to hedge for all risks.
Are Dow Jones Futures future contracts?
Yes. Dow Jones Futures are future contracts. This is because future contracts practically do not have an expiration date. It is also good because of the fact you can buy and sell single or bulk stock futures.
Need of future trading?
Futures contracts were designed as hedging tools for commodities trading where the buyer and seller can secure a fixed trading price in the future in order to hedge against price fluctuations. Today, futures trading is used for both leverage and hedging. Futures trading enables you to trade directional leverage as much as ten times. This means that by buying futures instead of the stock or commodity, you could make ten times the profit on the same move. However, leverage cuts both ways. You could lose up to ten times as much as well. For more about futures trading, refer to the link below.
What is meant by currency hedging?
Currency hedging is used to reduce the risk on a position with a currency pair by taking a transaction opposite to the direction that the investor wants the value of the target currency to move. An investor in a long position will seek to protect against possible downtrends, and an investor in a short position will seek to protect against possible uptrends. Hedges can be accomplished by using securities such as spot contracts or options on currencies.
