Applied Financial Mathematical Model for Derivative Instruments and Hedging Exchange Rate

Currently, the international economic transactions are regularly occurring. The statistics of imports and exports were published by the General Administration of Customs that the total turnover of the country's imports in year of 2012 was 228.37 billion U.S. dollars, increased by 12.1 % in comparison with the results of 2011. Thus, this is the 2nd year in a row total export and import turnover of Vietnam exceeded $ 200 billion. 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?