Foreign exchange rates and hedging positions using currency derivatives

What is the most important concept you have learned in this course and why?

Student 1:

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The most important concepts to me throughout this course are foreign exchange rates and hedging positions using currency derivatives to limit exposure risks. When conducting international businesses with other countries, it’s imperative to be aware of the risks associated with payables and receivables in another country’s form of currency. The fluctuations of value in foreign exchange rates of another country can greatly influence their revenues and profits. Hedging your position using currency derivative contracts can ensure that you an sell or purchase a currency at the future date. Most common types of fx derivatives include forward contracts, futures contracts and options.

Student 2:

I believe that the most important concept explored during this course was exchange rates, particularly the parities that exist between interest rates, inflation and exchange rates. Understanding the effects and relationships of global movements in interest rates, inflation and exchange rates has helped me to better grasp what to expect from these fluctuations. With more knowledge about what reactionary responses that are likely to take place, one can better mitigate risks or take advantage of future circumstances. This makes me a better investor through my ability to anticipate international reactions to movements in interest, inflation and exchange rates.

Student 3:

The most important concept I have learned in this course is the importance of examining a country’s current and possible arising financial and political position before making decisions on whether to invest with that country. Examining a country’s financial and political position before investing is important because it is important to understand exchange rates and how that could affect the potential for earning money back on the investment itself, as well as how they are financially able to compensate the firm and even how political parties at play may make investing more difficult than it should be.

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