Toggle navigation
Payment Services
Hedging Services
About
Contact
Help
Login
EN
English
Ελληνικά
Examples
Hedging Services
Examples
TFI Hedge Example based on Forward Hedging
Example
•
A Business sells Computers in Europe.
•
The Computers are imported from China and invoiced in USD.
•
The Company just ordered 100 computers, invoiced at $140,000, payable in two months time.
•
The EUR/USD forward rate today is 1.06.
•
Each Computer is sold at €1,400.
•
In this example the client expects an income of €140,000 and has an expense of $140,000.
EUR / USD
in two months time
The following comparison below shows the profit margin of the client between (i) the client assuming the foreign exchange risk and (ii) hedging with a two month €100,000 forward contract under different EUR/USD exchange rates.
1.10
Invoice
$140,000
Euro Equivalent
€127,273
FX Risk
— Not Hedged —
Cost per Unit
€1,272
Profit per Unit
€128
Profit Margin
10%
FX Risk
— Hedged —
Forward Rate
1.06
Cost per Unit
€1,320
Profit per Unit
€80
Profit Margin
6%
1.05
Invoice
$140,000
Euro Equivalent
€133,333
FX Risk
— Not Hedged —
Cost per Unit
€1,333
Profit per Unit
€67
Profit Margin
5%
FX Risk
— Hedged —
Forward Rate
1.06
Cost per Unit
€1,320
Profit per Unit
€80
Profit Margin
6%
1.00
Invoice
$140,000
Euro Equivalent
€140,000
FX Risk
— Not Hedged —
Cost per Unit
€1,400
Profit per Unit
€0
Profit Margin
0%
FX Risk
— Hedged —
Forward Rate
1.06
Cost per Unit
€1,320
Profit per Unit
€80
Profit Margin
6%
— Without Hedge
Vs
Hedged
shows the effects of the fluctuation of the rate that will have on the profit margin, in two months time.
— Hedged
shows that Hedging removes currency risk.
Risk Warning:
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
52% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Read Full Disclaimer
Licences
|
Legal Documentation
|
KID Documents
|
Auditors
|
Cookies Policy
|
Privacy Policy
|
Terms Of Use
Back to Top
TFI Markets Ltd
We specialise in currency conversion, third party payments and the provision of risk mitigate solutions to corporate clients.
Subscribe to our Company News & Notifications
You can choose what news to receive.
Subscribe
Payment Services
Why TFI Pay?
Cost Comparison
Open an Account
Currency Conversi...
Service Payments
Hedging Services
Why TFI Hedge?
Examples
Currency Options
Option Strategies
Hedging with Forw...
Info & Tools
Fees & Charges
Cut-Off Times
Bank Interest Rat...
Economic Calendar
Calculators
Trading Services
About Trading Ser...
Trading Introduct...
Open an Account
Protection of Cli...
Trading Products
My Account
Login
Open an Account
Forgot Password /...
About the Online ...
Download MT4 Plat...
Help & Support
Help Center
Contact Us
API