Derivatives can be used to manage risks arising from Foreign Exchange, Interest Rates or Commodity prices.
- Foreign Exchange: Cross-currency swaps, options and combinations of these are regularly used to mitigate risks arising from exchange rate fluctuations
- Interest Rates: For example, clients having term loans under which they are paying floating interest might consider entering into Interest Rate Swaps to fix the interest they pay.
- Commodity prices: Commodity importers are worried about price increase while exporters are worried about price decrease. Derivatives can be used to fix the prices, hence enabling the importer or exporter to manage cash flows more efficiently.
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