Article | REF: AG1324 V1

Foreign exchange risk management

Author: Jacques DUBOIN

Publication date: October 10, 2013

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2. External hedging techniques

Thanks to the freedom of foreign exchange, banks have developed a number of techniques to cover international trade operators against foreign exchange risk:

  • forward exchange contracts ;

  • foreign currency loans ;

  • currency swaps ;

  • currency options.

2.1 Forward exchange contracts

Interest

To hedge all fixed-term payment or receipt transactions against currency fluctuations.

A forward exchange contract is a purchase or sale of foreign currencies at a guaranteed rate on a specific date (figure

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External hedging techniques