Forward Exchange Rates and Currency Swaps

Almost every individual at some point in their lifetime faces some form of foreign exchange or currency risk. An individual going on holiday to a foreign country faces the risk that exchange rates may move against them if they wait to change the bulk of their money at their destination, or it may move against them if they do not. Financial institutions and corporate bodies face similar risks but on a much larger scale and over many different time horizons. For example, consider the case where a company wishes to make a one-off purchase of special equipment. The decision which must be taken is: Should the foreign currency be purchased today and held (on an interest bearing account) until it is required? Or should the currency be purchased on or close to the date that it is needed? These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.