The fluctuation of exchange rates, or volatility, is the fundamental reason importers and exporters hedge foreign currency exposures. Although payments or receipts may not change in foreign currency terms, volatility in exchange rates can result in material impacts of such payments or receipts in local currency terms. A measure of FX volatility is a fundamental input into the pricing and valuation of FX options.
How Hedgebook helps:
Hedgebook is used to record, report and value FX options, including the split between time and intrinsic value. The valuation of an FX option clearly shows the spot rate, forward rate and volatility used in the calculation.
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Download our introductory eBook for Importers and Exporters on how to better manage FX Risk. Understand what constitutes FX risk, whether you should be hedging against it, the common financial instruments involved and the technology tools available to make the process easier and more secure.