foreign exchange derivatives


Any financial instrument that locks in a future foreign exchange rate. These can be used by currency or forex traders, as well as large multinational corporations. The latter often uses these products when they expect to receive large amounts of money in the future but want to hedge their exposure to currency exchange risk. Financial instruments that fall into this category include: currency options contracts, currency swaps, forward contracts and futures contracts.

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You should always try and shop around so that you know you will get the best rate on any foreign exchange derivatives.

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The payoff for the company was dependent on the foreign exchange derivatives and how well the exchange rate was for both the dollar and the euro.

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