Can anyone explain, in simple terms, how futures contracts can be used to hedge a foreign currency risk ?
822787
Futures allow you to lock in a price today for something like foreign currency. If you are investing in Japanese bonds that are maturing in 3 months and you want to convert them back into dollars but don't want to risk the dollar dropping in value, you could just buy a futures contract on dollars and lock the price in today.
328872
It depends upon your investing time horizon and which country you are in.  If you are in the US then US treasury bond yields can be used, but you need to find the one which corresponds to the period of time you are talking about. If you are in the UK then you neeed to find the gilt yields.  Gilts are UK government bonds and you can find this easily in the FT.  Right now in the US and other places the short term and long term rates are quite similar, so if you can tell which time horizon is being referred to, you aren't making a huge error.  This is referred to as a "flat yeld curve".  Normally (speaking historically) the long term rates are higher than the short term rates.
763061
Basically, international interest rates and exchange rates, both spot and forward, are closely connected to each other through "international interest rate parity" . This means that when you invest in a higher interest rate country you expose yourself to currency (FX) risk. That is, you risk that the move in the exchange rate will adversly affect your return in a foreign CD. However, if you hedge your currency risk then that interest rate premium disappears. That is, the interest rate premium/discount is priced into FX forwards and all other derivative instruments.
713228
It's a transaction where the delivery of whatever commodity you are trading will be in the future, but at a price determined today. It is often used to hedge against the risk of negative currency fluctuations by companies doing business in foreign countries.\n\nFor example, if the yen to dollar exchange rate is 100 yen for 1 dollar (hypothetically), and the exchange rate switches to 80 yen for 1 dollar, a Japanese company who sold a 20,000 car in the US would only get 1,600,000 yen for the car, versus what it would have received originally (2,000,000 yen). Companies can not keep changing prices, and they can not ask for more money once a sale is complete. Thus, the forward contract would insure that the Japanese company received at least a certain amount, say 1,800,000 yen (whatever the forward contract is for). Of course, if the rate becomes 120 yen to 1 dollar, the Japanese company would choose not to exercise the forward contract. \n\nForward contracts normally cost quite a bit, otherwise the companies offering them would not make any money. In essence, they are acting like insurance companies: you will not always need them, but you still have to pay the premiums if you want them just in case.
1074580
If you are an exporter, when the dollar declines against the currency of the country to which you are exporting, you will make more on your products.\n\nIf you are an importer, when the dollar declines you will pay more for what you import, making less money.\n\nAnd vice versa.\n\nConsider hedging the risk of currency fluctuations by using currency futures.
848511
I don't.  Not every stockbroker has an options specialist, but the larger ones online may have.  They are sold through investment firms, but an options specialist has more training than a Registered Representative, or stockbroker.\n\nYes, there is a much bigger risk, but your risk is the amount of your option price and the transaction costs.\n\nThe only investment vehicle which is more risky is a futures contract or a forward contract.  Investing in a hedge fund runs a close second to trading futures contracts(USA) or forward contracts(Europe and parts of Asia).\n\nBe very, very careful.
177789
Various interest rate futures (5 year/10 yr notes/US Treasury bonds) trade on the CBOT.\n\nThe Eurodollar (interest rate on USD in Europe) also trades on CME.\n\nBoth sites have charts.\n\nAs faras news is concerned, you really need to look at major announcements that affect interest rates.  Typically these are similar to what affects currencies too.  Forexnews.com isn't a bad site for this stuff.  It also shows upcoming events too.\n\nIf you're looking for extensive historical data on the futures contracts, the futures exchanges sell this data for a fee, as do third party data vendors such as premium data site.\n\nCheers,\nRichard.
910718
Did you mean to say "interest rate RISK"?  Well, the simplest way to manage interest rate risk is not to have it (i.e., borrow at a fixed, rather than floating, interest rate).  If you do have to borrow at a floating rate, you can hedge your risk with interest rate futures, forward rate agreements, or swaps...
76283
Hi there.\n\nRead this article i wrote..hope it will help.\nhttp://www.amazines.com/article_detail.cfm?articleid=76237&Title=forex%2Cbroker%2Ccurrency%2Ctrading\n\nGood luck
231682
I can train you.\n\nVery Important Note:\nIf you don't have assets of at least $2,500,000.00 and if you are not willing to lose at least $25,000.00 PER DAY I suggest you to stay way from energy futures.  \n\nFUTURES ARE RISKIER THAN OPTIONS
461964
http://www.asx.com.au/investor/options/index.htm\n\nThis is the best website which gives an indepth and accurate information on Options and futures strategies.\nI am shure this will serve your purpose.
497513
Try CBOT.com or CME.com, of course depends on what futures you want to trade.\n\nRival
3847
It can work.  Can strike a futures contract with 100,000 up front.  The problem is...who is going to believe you?  thats why you give collateral...but what will you work with?  and not every company is in the business to do pawning..you see what i mean?  I guess the other company has to be your friend......
667901
In my opinion the U S dollar is not a safe currency to be in at the moment. There are some realatively safe ways to protect ones self from currency fluctuations but short term anything could happen. \n\nOne possibility is to have some of your assets in oil securities. Oil is relatively currency free as an investment. Another possibility is to invest in a pool of debt securities of various foreign governments. That minimizes the risk associated with one currency.
677237
I've been investing a lot in foreign stocks.  Gold is obviously a great hedge against falling currency values, but it isn't a productive investment.  It may go up in price, but it doesn't grow in the way businesses can.  The same can be said for investing in foreign currencies.  You can hedge against the dollar with them, but there's no growth in currencies either.  \n\nIf you think it's only the dollar that will be falling (and not all currencies in a worldwide inflation), then investing overseas is the way to go.  And if you want to preserve the opportunity for growth in addition to simple hedging, buy stocks in those markets that you feel are safe.
105757
Hedging is the attempt to mitigate the impact of economic risks on an entity's performance. Many businesses will engage in hedging activity to limit economic risk. Hedging activity can be as simple as borrowing in a foreign currency where an entity has a usual revenue stream in that currency. Many economic hedges will not meet the criteria to qualify for the special accounting treatment identified in IFRS as hedge accounting. \n\nHedge accounting means designating a hedging instrument, normally a derivative, as an offset to changes in the fair value or cash flows of a hedged item. Non-derivative financial instruments may be used as hedging instruments in certain limited circumstances . A hedged item can be an asset, liability, firm commitment, or forecasted future transaction that is exposed to a risk of change in value or changes in future cash flows [IAS39.10]. Hedge accounting attempts to match the offsetting effects of the fair value changes in hedged items and hedging instruments, and recognise them in net profit or loss at the same time. \n\nThe normal rules for financial instruments call for all derivatives to be carried at fair value with gains and losses in the income statement  . Hedge accounting allows departures from the normal recognition rules. Accounting rules for hedging are necessary to reflect the economics of hedging relationships in reporting performance. An entity using hedge accounting can impact on the timing of recognition of gains and losses from fair value changes in hedged items and hedging instruments, and avoid the significant volatility that might arise if the gains and losses were recognised in the income statement under normal accounting rules.
301814
one answer: currency risk