Exotic Variants of Currency Derivatives and Currency Risk Hedging

This bachelor’s thesis deals with the issue of currency derivatives with an emphasis on more complex exotic variants and their practical application. The main objective is to analyse the principles and characteristics of selected derivatives and to test their application through more advanced strategies for currency risk hedging. In the theoretical part, basic currency derivatives are first systematically defined, with particular attention paid to their exotic forms. This section of the thesis also places emphasis on valuation methods for derivatives and their significance in risk management. The empirical part of the thesis analyses selected approaches to currency risk hedging using alternative forms of derivatives, based on the actual historical development of time series. The output of the empirical part is a recommendation for choosing an appropriate hedging instrument with regard to the company’s initial exposure and different scenarios of spot rate developments.