MANAGEMENT

Detailed explanation-1: -The two most common methods to hedge foreign currency exposure are forward contracts and currency options. Forward contracts and options are a form of derivatives, namely over-the-counter derivatives, meaning that they are not traded on centralized markets but rather privately negotiated between two counterparts.

Detailed explanation-2: -Exchange rate risk cannot be avoided altogether when investing overseas, but it can be mitigated considerably through the use of hedging techniques. The easiest solution is to invest in hedged investments such as hedged ETFs. The fund manager of a hedged ETF can hedge forex risk at a relatively lower cost.

Detailed explanation-3: -Hedging is accomplished by purchasing an offsetting currency exposure. For example, if a company has a liability to deliver 1 million euros in six months, it can hedge this risk by entering into a contract to purchase 1 million euros on the same date, so that it can buy and sell in the same currency on the same date.