Currency Risk and Forward Contracts

Exchange rates and financial markets are quite volatile. Companies deal with a variety of hazards in the industries they work in. Due to exchange rate volatility, businesses that trade in foreign currencies may experience unfavorable consequences ranging from decreased profit margins to insolvency. Such risks may be controlled, and the effect of currency rate changes on profit margins and the viability of the business can be minimized. Companies that manage the consequences of currency risk have the chance to succeed more by concentrating more on their areas of expertise. Currency One of the items that gives businesses the chance to control risk is forward transactions. Forward transactions are described as an irreversible buy and sell at a certain underlying asset's predefined future date.

The purpose of this course is to describe and clarify foreign currency forward transactions, one of the strategies firms can employ to protect themselves from the negative effects of exchange rate risk. The basis of forward contracts will be the main topic of the course. The determination of the forward foreign currency purchase price will contain case studies and information on different contract types.