NISM Series XIII Common Derivatives Certification Exam Notes
Page 145 Of 303
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Exposure Sources:Hedgers’ exposure comes from import/export, foreign investments or other FX-linked activities.
Objective of Hedging:Hedgers aim to reduce future cash flow volatility by locking currency rates.
Example of Hedging:An exporter shipping to Europe sells EURINR futures or buys EURINR put options to protect against EUR depreciation.
Speculators:Speculators take on FX price risk without real exposure, aiming to profit from price movement.
Speculators' Role:They provide liquidity and act as counterparties to hedgers.
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