1 Hedging Introduction In international transactions, companies often find themselves in situations where they face and increase the risk of foreign exchange exposure. A hedge is an instrument that is used to minimize an organization’s exposure to adverse currency or price fluctuations. Hedging strategies also facilitate the protection of an organization's income streams and to reduce its expenses. Hedging allows an organization to plan its finances better. In essence, hedging acts like an insurance system because it protects an organization’s future cash-flows. Importance of Hedging A hedge protects one's finances from situations that have the potential to devalue its assets. Using hedging instruments, the company secures itself against price changes and currency fluctuations, which may affect the value of the business negatively (Petty et al., 2015). Hedging locks in a price which provides a guarantee of the stability of the organization’s current and future cash flows enables the company to obtain a more accurate calculation of the property’s purchase price and reduce the instability of the firm’s cash position through minimizing its risk exposure. Buy this excellently written paper or order a fresh one from ace-myhomework.com