Foreign Exchange Hedging
foreign exchange hedging
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In terms of currency, what does the term "coverage" mean? 10 points immediately to better meet
It is a way to reduce their exposure in the investment or speculation. For example, suppose you want Qantas really buy stocks, since all the bad news at the moment, you think you will recover very quickly. But you want to avoid the risk of losing money because the dollar Australian falls. Without coverage, go to the bank, buying Australian dollars, consider the market and invest in Qantas shares. Two days later, the stocks go up and obtain a benefit, but the Australian dollar depreciates, and the money you make is even or worse. So, instead of covering the risk of change. You buy shares Qantas as described, then buy a sheet set your conversion rate. Again, Qantas shares, you sell the secret and the agreed rate, and voila – you is better. Of course, this is speculation, if shares down – is lost. If the Australian dollar appreciates, you lose. But if you are very confident that the actions soar, the currency is devalued, then you're ready to go. And only a fence can do. It's a bit simplistic, but you can change other investments of this scenario, and do the opposite – expect the Brazilian real soar, but the market down to keep thee in the index.
Foreign Exchange Hedging Strategies
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