Foreign Exchange Derivatives

Frank J. Fabozzi, Gueorgui S. Konstantinov () and Suprita Vohra
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Frank J. Fabozzi: Johns Hopkins University’s Carey School of Business
Gueorgui S. Konstantinov: Senior Portfolio Manager of Fixed Income & Currencies
Suprita Vohra: Financial Professional Specializing in Foreign Exchange and Interest Rate Derivatives

Chapter Chapter 4 in Derivatives Applications in Asset Management, 2025, pp 67-85 from Springer

Abstract: Abstract Foreign exchange (FX) derivatives are critical tools for managing currency risk and navigating the complexities of global financial markets. This chapter explores foundational FX derivatives, including forwards, futures, options, and swaps, alongside advanced instruments like exotic and cross-rate derivatives. While forwards and swaps offer tailored solutions for hedging currency exposure, futures and options provide transparency and liquidity through standardized exchange-traded structures. Exotic derivatives, such as range forwards and barrier options, cater to unique hedging or speculative needs, while cross-rate derivatives enable efficient risk management across non-domestic currency pairs. The chapter emphasizes the importance of liquidity, cost, and counterparty considerations in choosing the appropriate derivative, providing a comprehensive understanding of how these instruments enhance portfolio management. By addressing diverse currency risks, FX derivatives play a vital role in mitigating uncertainty and optimizing financial outcomes in a globalized economy.

Keywords: Foreign exchange derivatives; Currency risk management; Exotic FX instruments; Cross-rate derivatives; Currency options; FX Hedging strategies (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-86354-7_4

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DOI: 10.1007/978-3-031-86354-7_4

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