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Applied Financial Mathematical Model for Hedging Exchange Rate

Doan Van Dinh, Guangming Gong


The application of financial mathematical models to evaluate the forward rates of foreign currency played an important role in the development of the exchange rates market and the management process of this market risks because of the close relationship between the methods of financial mathematics models and the hedging activities of financial markets. This result shows that the foreign currency transactions of Vietnam economy are growing and exchange rates are regularly fluctuated in the foreign exchange market. The objective of the article is application of derivative instruments to hedge exchange rate fluctuation. From the data of actual economic events, the article uses the financial mathematical formulas to evaluate spot rate, forward rate, put and call options rate and finds out the results of the impact factors of exchange rate risk and the effectiveness of the application of derivative instruments for financial hedging. The research results show that the application of derivative instruments is necessary to minimize financial risk and how to bring high economic benefits?


Derivatives instruments, hedging, exchange rate, forward contracts, option contracts, swap contracts.

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