Currency risk hedging

The Bank offers comprehensive solutions for transaction risk management and hedging strategy development.

A hedge is an investment position intended to offset potential losses and risks by opening a position in the opposite direction in a hedged asset. These operations allow you to plan business operations and financial results of the company effectively, as well as avoid significant losses as a result of unfavorable currency fluctuations.

Import and export companies, as well as foreign currency borrowers, are exposed to currency market risks. Given fluctuation in the exchange rates, lack of hedging measures may lead to significant losses.

Hedging instruments:

  • Futures - a financial contract obligating the seller to sell an asset and the buyer - to pay for it at a predetermined future date and price. Some futures contracts may call for physical delivery of the asset, while others are settled in cash between a buyer and a seller.
  • Forward - a customized contract between two parties to buy or sell an asset at a specified price on a future date. Unlike standardized futures contracts, the delivery date, an amount of the contract can be customized.
  • Option – a contract offering the buyer the right (but not the obligation) to buy or sell a certain asset at an agreed-upon price during a certain period of time or on a specific date. The option giving the holder the right to buy an asset is called a ‘call’ option, while the option to sell is called a ‘put’ option. For this right, the buyer pays the premium to the option seller also known as option price. The option price equals to the cost of hedging.

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