Using Derivatives to Hedge Foreign Exchange Risk and Maintain Stable Purchasing Power Parity

RUNNING HEAD: International financial management
1
Name of student
Topic- International financial management
University-

International financial management 2
Executive Summary
` In this report, evaluation of the different ways of derivatives has been taken into
consideration. There are several derivatives tools such as forward contract, future contract,
call option and put options. These derivatives tools are used to overcome the foreign
exchange risk and overcome the risk arise from the eexpected change among the exchange
rate of two currencies

International financial management 3
Table of Contents
Executive Summary...............................................................................................................................2
Introduction...........................................................................................................................................3
International fisher effect......................................................................................................................3
Purchasing power parity........................................................................................................................4
How derivatives could be used to protect against the failing of purchasing power parity and
International fisher effect......................................................................................................................4
Conclusion.............................................................................................................................................6
References.............................................................................................................................................7