An FX forward has "two-sided exposure" because each
party potentially has a favorable or unfavorable outcome,
depending on which direction the currency exchange rate
moves. Consequently, both the downside risk and the upside
potential on the hedged item are counterbalanced. Stated
differently, a loss or gain on the hedged item will be offset by
a gain or loss, respectively, on the hedging transaction. FX
forward hedges, if perfectly matched long (receivable) and
short (payable), eliminate risk and return from FX positions.
Because FX options are much simpler to explain than
FX forwards.