Currency Warrants

AAA

DEFINITION of 'Currency Warrants'

A financial instrument used to hedge currency risk or speculate on currency fluctuations in foreign exchange markets. A currency warrant, like other option derivatives, gets its value from the underlying exchange rate - the warrant's value goes up and down with fluctuations in the underlying exchange rate. Also, currency warrants are priced the same way as currency options and allows holders the right to exchange an amount of one currency into another currency at a specified exchange rate before or on a specified date.

INVESTOPEDIA EXPLAINS 'Currency Warrants'

Typically, warrants are used to manage risk if you have exposure to a certain currency and wish to hedge against potential losses. The other common use of currency warrants is to speculate on the movement of exchange rates and earn a profit if your view is correct. The leverage in currency warrants allows users to gain more exposure to exchange rate movements.

RELATED TERMS
  1. Bank

    A financial institution licensed as a receiver of deposits. There ...
  2. Currency

    A generally accepted form of money, including coins and paper ...
  3. Currency Option

    A contract that grants the holder the right, but not the obligation, ...
  4. Currency Swap

    A swap that involves the exchange of principal and interest in ...
  5. Derivative

    A security whose price is dependent upon or derived from one ...
  6. Multibank Holding Company

    A company that owns or controls two or more banks. Mutlibank ...
Related Articles
  1. Currency Exchange: Floating Rate Vs. ...
    Forex Education

    Currency Exchange: Floating Rate Vs. ...

  2. Forex: Wading Into The Currency Market
    Forex Education

    Forex: Wading Into The Currency Market

  3. The Currency Board: Understanding The ...
    Personal Finance

    The Currency Board: Understanding The ...

  4. Top 7 Questions About Currency Trading ...
    Forex Education

    Top 7 Questions About Currency Trading ...

Hot Definitions
  1. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  2. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  3. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  4. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
Trading Center