Hedging and Derivatives

Hedging: Covering of risk is called Hedging.

How do you cover risk?

In forex transactions – Risk is covered by derivatives.

Derivatives: It is a financial product whose value is derived from underlying asset or transaction.

Rupee Derivatives: Credit default swap, Total return swap, Credit linked notes.

Forex Derivatives:  Forward contracts, Futures, Options, Swaps

Over the Counter (OTC): It means transaction with Bank.

Direct Forex Quotation: It is one, in which foreign currency unit is fixed and domestic currency value keeps on changing or domestic foreign currency is variable.

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