FX exposures are commonly managed by a technique
called hedging. By hedging, a company can avoid a loss that
may otherwise arise.The idea is to have a counterbalancing
gain on the financial instrument used to achieve the hedge if
a loss occurs on the item being hedged. As identified earlier,
the various FX exposures that can be hedged range from an
existing FX receivable or FX payable to an anticipated future
revenues stream. A specific FX exposure being hedged is
commonly called the hedged item. The fmancial instrument
used to achieve the hedge is commonly called the hedging
instrument.