Hedging Foreign Exchange Risk Exposure by Importer Companies

Abstract

The study was conducted in order to disclose the Foreign Exchange (FX) rate risk faced by every importer company. The paper investigates FX risk hedging strategy using forwards versus floating strategy in terms of minimizing total importing costs. The study exposes real-life costs of hedging strategies using forwards comprising theoretical foundations as well as practical implementation example based on real company data. The main question to be answered in the paper is whether it is beneficial to hedge with FX forwards or it is better to float FX exposure.