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. Currency

    A generally accepted form of money, including coins and paper ...
  2. Currency Swap

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

    A security whose price is dependent upon or derived from one ...
  4. Currency Option

    A contract that grants the holder the right, but not the obligation, ...
  5. Bank

    A financial institution licensed as a receiver of deposits. There ...
  6. Multibank Holding Company

    A company that owns or controls two or more banks. Mutlibank ...
RELATED FAQS
  1. If a country's currency is determined by the strength of its economy, why isn't the ...

    Generally speaking, when Country A's currency is worth more than that of Country B, it does not necessarily mean that Country ...
Related Articles
  1. Forex Education

    Currency Exchange: Floating Rate Vs. Fixed Rate

    Baffled by exchange rates? Wonder why some currencies fluctuate while others are pegged? This article has the answers.
  2. Forex Education

    Forex: Wading Into The Currency Market

    We go over the ground rules and available resources needed for this undertaking.
  3. Personal Finance

    The Currency Board: Understanding The Government's Bank

    Currency board, central bank - what's the difference? Find out more about this little-known monetary authority.
  4. Forex Education

    Top 7 Questions About Currency Trading Answered

    Whether you're puzzled by pips or curious about carry trades, your queries are answered here.
  5. Bonds & Fixed Income

    6 Factors That Influence Exchange Rates

    Find out how a currency's relative value reflects a country's economic health and impacts your investment returns.
  6. Options & Futures

    Give Yourself More Options With Real Estate Options

    Real estate options have many benefits, including a smaller initial capital requirement.
  7. Investing

    How To Take Advantage Of A Stronger U.S. Dollar?

    If you are invested in the market, you will feel the effects of a stronger dollar, especially if overseas interests are part of your diversified portfolio
  8. Options & Futures

    The Fancy Way To Diversify Your Portfolio: Precious Metal Options

    A guide with strategies on how to invest or trade in precious metals by using options.
  9. Options & Futures

    When And How To Take Profits On Options

    Here are the different criteria to ensure maximum profit taking while trading options.
  10. Options & Futures

    The Future Is Now: All About Futures ETFs

    A new security class - futures ETFs - is gaining popularity. We tell you how futures ETFs work and offer tips.

You May Also Like

Hot Definitions
  1. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  2. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  3. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  4. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  5. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  6. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
Trading Center