Current location - Trademark Inquiry Complete Network - Futures platform - Why can forward foreign exchange transactions avoid the risk of exchange rate fluctuations?
Why can forward foreign exchange transactions avoid the risk of exchange rate fluctuations?

Mainly rely on hedging transactions to resist risks.

For example: Forward refers to foreign exchange transactions between major customers of financial institutions according to the agreed time, amount and exchange rate. , for example, Company A and Company B agree to pay USD 1,000 at a price of RMB 8/USD after 10 days. Futures have public trading venues. For example, Company A expects to receive 80 million yuan in one month and plans to use the funds to pay Company B’s payment of US$10 million. Then Company A can trade at a price of 8 RMB/USD. Buy US$10 million in foreign exchange futures. On the delivery date (that is, one month later), if the exchange rate becomes 8.3, Company A will make a profit of 3 million (8.3-8) × 1000 from the futures market, which together with 80 million in cash can be exchanged for 10 million US dollars; 7.8, then Company A loses 2 million (7.8-8) × 1000 in the futures market, but the company only needs RMB 78 million to exchange 10 million U.S. dollars, and the remaining 2 million is exactly a hedge against the loss of 2 million. No matter how the exchange rate changes, Company A always exchanges 80 million yuan for 10 million US dollars.