Evaluate the advantages and disadvantages of various exchange-hedging instruments and techniques. Also, distinguish financial from non-financial risk management approaches. You may present your result in tabular form separating instruments from techniques

There are many advantages of hedging techniques. Some of the key advantages are mentioned below:

Hedge allow the organizations or businesses to manage the harsh market conditions.

Through hedging techniques profit can be locked by the companies

Using options and futures for managing short term risk is a good strategy

Through hedging the company becomes safe from exchange rate, inflation rate and interest rate changes

The key disadvantages of using hedge instruments are:

Various hedging technique are costly and have impact on profit.

Short term businessmen cannot use the hedging strategy easily

Options & futures require large capital requirement (Sercu 2009).

The financial risks usually involve market risk, liquidity risk and credit risk however the non-financial risk include political risk, risk of competition and economic risks etc. In short there is significant difference in financial & non-financial risk management.

References of International Financial

Sercu, Piet. 2009. International Finance: Theory into Practice. Princeton University Press.