Currency Hedging Calculator

Forward contracts lock in exchange rates but eliminate potential gains from favorable rate movements

Currency options provide protection while allowing upside potential, but come with premium costs

Natural hedging through operational matching of revenues and costs can reduce hedging needs

Partial hedging (50-75%) balances risk protection with potential upside opportunities

Consider transaction costs, margin requirements, and counterparty risk when selecting hedging instruments

Regular monitoring and rebalancing of hedge positions is essential as exposure changes

Use longer-term hedges (12+ months) for predictable exposures and shorter-term for uncertain ones

Diversify hedging strategies rather than relying on a single instrument for all exposures

Factor in interest rate differentials between currencies when evaluating forward contracts

Consider tax implications and accounting treatment requirements for different hedging strategies