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2012, vol. 5, iss. 1, pp. 91-100
Comparative analysis of currency risk protection instruments
University of Business Academy in Novi Sad, Faculty of economics and engineering management

emailbrane1952@yahoo.com, sandra.radakov@gmail.com
Keywords: exchange rate fluctuations; foreign exchange risk; hedging; financial derivates
Abstract
The paper discusses the possibility of protecting enterprises against the risk of exchange rate fluctuations. If a company generates income in one currency and makes payments in another currency it is exposed to the risks of exchange rate changes. This research aims at highlighting the advantages and disadvantages of the application of certain financial derivatives to hedge exchange rate changes, while also touching upon possibilities of neutralizing these risks by using factoring business. The greater the difference between revenues in one currency and expenditures in another currency, the greater is the need to protect companies against foreign exchange risk or currency hedging. The use of financial derivatives cannot prevent negative events from happening. However, even when negative events happen, their impact will be significantly reduced.
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article language: Serbian
document type: Review Paper
published in SCIndeks: 22/03/2013