Money market hedges
You'll learn how money market hedges work to lock in a fixed exchange rate for future foreign currency transactions. This technique uses borrowing and deposit accounts in the money markets to eliminate currency risk, ensuring certainty over the amount you'll pay or receive.
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In this lesson
- 0:00 Money market hedges explained
- 0:31 Hedging a foreign currency receipt
- 1:35 Worked example: receipt hedge calculation
- 4:48 Hedging a foreign currency payment
About this lesson
We'll walk through the step-by-step process for hedging both future receipts and payments, with worked examples showing how to calculate the exact future value using spot rates and interest rates. This is essential knowledge for FM, AFM, and SBL papers where currency risk management is examined.
Duration: 6m
Transcript
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