5 things every leader should know about currency hedging

Lucia Maxim, 11 Feb 2010

Romanian version

Currency hedging is an approach that is intended to protect companies and institutions’ revenues and expenses from the risk incurred by any shifts in the value of currency used in the investment scheme. In order to explain what currency hedging consists in and how it can influence a company’s balance, Wall-Street interviewed specialists in the field and compiled a list of five most important things every leader should know about currency hedging.

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3. Currency hedging doesn’t maximize profits

Hedging operations, whether currency, interest or for adverse price movements, is intended to minimize risk and raise predictability, instead of maximizing profits, Cosmin Bucur outlined. However, it doesn’t mean that hedging vehicles cannot generate profit or loss, but this is not the purpose here.

“Narrowing price movements, and raising predictability are the main purposes why leaders use hedging vehicles”, RBS’ analysts added.

Iulian Lupu points out that the difference between profit and loss depends on several factors and currency hedging can be one of them.

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