Exchange rates can move up or down, and spot rates could move favourably as well as adversely. However, many companies prefer to hedge their currency risks by fixing an exchange rate now for a future...

Exchange rates can move up or down, and spot rates could move favourably as well as adversely. However, many companies prefer to hedge their currency risks by fixing an exchange rate now for a future transaction, even if this means that it will not be able to benefit from any favourable future movement in the exchange rate.

Required

Discuss the methods of hedging exposures to foreign exchange risk.