The spot rate for euros $1.25/€ and the 3-month future is $1.20/€ The spot rate for pounds $1.15/E and the 3-month future is $1.05/E You owe €1,000,000 in 3 months You are going to receive £1,000,000 in 3 months If you choose to hedge with futures you must think, O The spot rate in 3 months will be below $1.20/€ in three months and the spot rate will be below $1.05/E in three months The spot rate in 3 months will be above $1.20/€ in three months and the spot rate will be above $1.05/E in three months The spot rate in 3 months will be above $1.20/€ in three months and the spot rate will be below $1.05/E in three months The spot rate in 3 months will be below $1.20/€ in three months and the spot rate will be above $1.05/E in three months

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Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.