Tag Archive: Hedging

Jan 09

A case study about hedging

A spanish professional football team plans to play an exhibition game in the United Kingdom next year. Assume that all expenses will be paid by the British government, and that the team will receive a check for £1million. The team anticipates that the pound will depreciate substantially by the scheduled date of the game. In …

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Mar 22


Hedging refers to the avoidance of a foreign exchange risk, or the covering of an open position. For example, the importer could borrow $100,000 at the present spot rate of SP=$2/£1 and leave this sum on deposit in a bank (to earn interest) for three months, when payment is due. By so doing, the importer …

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