HEDGING PROCESS :
Hedging can be defined as a process or mechanism of reducing, minimizing or eliminating
risk from a given transaction. A foreign exchange exposure is hedged or covered when the
company takes certain steps to insulate itself from the adverse effects of exchange rate
movements. The basic objective in hedging is to create a position in the foreign currency in
the direction opposite to the one that exists so that ultimately the balance or net effect
becomes zero. Hedging may be achieved through internal or external mechanisms.