Hedging of currency exposures : Lessons for SME exporters and importers

50-60 percent of international trade involves bilateral “trade credit” extended by the exporter to the importer or vice versa, and 60-70 percent of it is denominated and settled in currencies that are foreign to either of them. FX-denominated trade, in turn, exposes these firms to exchange rate or “FX” risk. Despite this, there is no systematic study of hedging techniques, and due to data limitations, the extant literature has a large-firm bias. In this study, I provide a survey of hedging and hedging instruments from the perspective of SMEs