Lydia Biel


If professional investors want to protect themselves from exchange rate fluctuations, they conclude futures transactions. They are cheap and only require a small amount of capital. Private investors can also use such contracts. There are a variety of different currency forwards available. They are designed differently in detail, but all work according to the same basic principle: In a forward exchange transaction, two parties agree to exchange two currencies at a predetermined rate at a predetermined time in the future. When the transaction is concluded, only a small part of the agreed amount has to be deposited as security, the so-called margin. The full amount is not paid until the contract matures (if the futures contract is held for that time). This results in the leverage effect of futures transactions.

If you want to hedge an equity investment in the USA against exchange rate risks, as a euro investor you have to sell US dollars in advance. The investor agrees with his broker to exchange US dollars for euros in three months, for example, at today’s exchange rate. Such a short position implies borrowing in the foreign currency. Because if there were no futures contracts, investors would have to hedge their shares with today’s exchange rate, take out a loan in the amount of the investment amount in US dollars and exchange the money immediately for euros.

The interest difference between the domestic and foreign currency corresponds to the hedging costs

The euros in turn can be invested in a secure interest rate investment for the term of the loan. The hedging costs that arise then result from the difference between the cost of borrowing and the income from the investment, i.e. from the difference between foreign and domestic interest. This interest rate difference is added to the respective daily exchange rate (spot rate), which results in the forward rate. If the forward rate is cheaper than the spot rate, it would be considered a banking jargon discount. The interest rate at domestic level is higher than at home. In the other example, when the advance rate is over the spot rate, buyers are paid a “premium.” Attractions overseas are larger. The disparity between interest rates in two areas of currency can be calculated from the so-called “bank and broker swap rate.”

Forex forwards

Foreign exchange forwards are individually negotiated currency futures transactions between two parties, for example between an investment fund that wants to hedge exchange rate risks and a bank. The advantage: the contracts can be tailored precisely to the needs of a customer. Forwards are the most widely used type of contract worldwide. These are over-the-counter foreign exchange transactions, so-called over-the-counter or OTC transactions for short.

Currency futures

On the other hand, currency futures are structured trade contracts. Three, six and twelve months are common terms. Chicago Mercantile Exchange (CME), with branches in all major international financial centres is the world’s biggest trade centre for foreign exchange transactions. Because of the standardization of contracts, the transaction costs of foreign exchange futures are relatively low. They are the cheapest way to hedge against exchange rate fluctuations.


In contrast to futures and forwards, which require a physical exchange of the respective currencies on the due date, the buyer of a warrant only acquires the right to buy a currency at a predetermined rate during the term (or at a certain point in time) (call) or for sale (put). The buyer is free to exercise the option or to let it lapse. The seller of the warrant receives the option price as a premium from the buyer. A warrant is a type of risk insurance, the price of which rises as the volatility of the underlying asset increases. Quotes are determined by a number of other factors. And the lever also fluctuates over time. If you want to use and trade warrants successfully, you have to deal intensively with how these papers work. That is why they are hardly an option for the majority of private investors. More about warrants and options.

Leverage Certificates

An alternative to warrants are leverage certificates. They have the advantage that they represent the development of a currency almost 1: 1. Because of the leverage, investors who use these certificates for hedging only have to raise a fraction of the investment amount to be protected. The main disadvantage of these products is their so-called knockout threshold. If the base value falls below or exceeds a certain mark, the certificate is either almost worthless or only a residual value is refunded, which the issuer determines “at its own discretion” depending on the configuration of the paper, as stated in an information brochure from Deutsche Bank. A leverage certificate is ultimately a risky bet on an underlying asset and is therefore not suitable for hedging exchange rates. More about certificates.

Better no currency hedging than overpriced products

Exchange rate hedging can reduce the risk of foreign investments . When investing abroad, investors should first check how the investment correlates with the currency. If there is no correlation ( correlation = close to zero), 100 percent hedging is optimal, the costs of which are reduced to the respective interest rate difference. The best instruments to protect against exchange rate risks are forwards and futures. Those who do not have access to these contracts can rely on funds whose currency risk is hedged by management.

Anyone who wants to buy gold can choose between gold bars and coins and a variety of securities that are linked to the development of the gold price. Which products are the right choice depends on the goals of the individual investor. The products that investors can use to buy gold directly and indirectly are almost as diverse as the flora and fauna in the Brazilian rainforest- and sometimes just as exotic. There is nothing that does not exist: bars, coins, exchange traded commodities (ETC), certificates, warrants, futures, mini-futures and other leverage products. Which is the right product depends on the respective goal: Anyone who invests for the long term and wants to diversify their portfolio with gold is well advised with ETC, which map the gold price development. Gamblers who want to speculate on gold price movements in the short term are right with leverage products. With these securities you can make big bets with a small stake. But the risk is correspondingly higher.

For investors who want to hold gold as insurance against disasters such as a currency collapse, the only option is buying gold bars. Internationally recognized coins, for which buying and selling prices are determined daily, are also an option. The most popular are the Krugerrand, Eagle, Maple Leaf, Britannia, Vienna Philharmonic, and Kangaroo. However, they are less recommendable because of the higher transaction costs compared to gold bars.

No guarantees with Gold ETC

No alternative to bars and coins are certificates and so-called ETCs, which, similar to an exchange-traded index fund (ETF), map the development of the gold price. These securities are always bonds: the buyer gives the issuer a loan. This means that there is an issuer risk. If the issuer of the security goes bankrupt, this can lead to a total loss. It is in the nature of things that the risk of issuer bankruptcy increases dramatically when there is chaos in the financial markets. Therefore, paper gold is not a suitable civil protection. This also applies if ETCs are physically secured . In these variants, the issuer buy gold bars to the value of the securities issued. The precious metal is held by subsidiaries that are legally separate from the company’s other business areas. This is to protect the investor gold from the bankruptcy of the parent company. But there are also pitfalls with this construction. It is uncertain that, in an emergency, there will actually be enough gold available to meet investors’ demands. This problem could easily be solved if a mutual fund would buy the gold and issue shares. For the investor money are at fund -protected funds and similar safe as a bullion in a bank vault. Funds in this country are not only allowed to invest in a single position, in this case gold, but must always spread the investor’s money.

Buy physical gold: Certified bars are the first choice

The direct purchase of gold bars is somewhat more complex and – depending on the quantity- often more expensive than the purchase of physically covered ETC, which investors can easily buy and sell on the stock exchange.

Anyone who invests in bars must pay attention to the gold content, weight and costs when buying. Only buy bars with a fine gold content of 999.9, i.e. 99.99 percent. Lower quality gold is more difficult to resell. Because it has to be melted down before it can be resold. No financial supervisor watches over the trading of gold bars and coins. There are also no legal requirements for the seller and the quality of their advice. If you want to buy gold , you should either contact a reputable gold dealer or a bank and first take a look at the gold price guide value on the Internet.

The Advantage of Online Insurance. On a legal level, online insurances are equal to traditional ones, however they have the advantage of having lower rates for all motorists and motorcyclists, this is because they have lower management costs due to the lack of sales network, branches, office and personnel costs, this has a positive effect on the price of insurance policies for all consumers, for this reason, they are preferred over traditional ones.

Thanks to the savings, the most experienced consumers with the use of the internet, decide to abandon their old company to rely on online insurance for RC Car and Motorcycle coverage, in order not to lose this important slice of the market, many of the traditional companies have created different brands, but always under their control, which deal exclusively with offering online insurance and not losing that important slice of customers for their turnover.

The choice of online insurance is made starting from the comparison of the various comparators such as Segugio. It, or 6sicuro. It which allow you to compare all the rates of the insurance companies according to your needs and then proceed directly with the subscription of the policy.

The online insurance comparison is quick, fast and automatic; it provides a detailed quote with the possibility of saving from a minimum of 30% up to a maximum of 70% for the cheapest offers.

While for young people the choice of online insurance has become usual practice, the most hesitant still cannot completely trust online companies, a matter of habit or lack of trust, in favour of the choice of online companies it should, however, be reiterated that in In the event of a claim, they act and provide the exact same service as the classic “office”, we are talking about immediate telephone assistance, furthermore, when an accident occurs, the online insurance companies have much shorter compensation times than the traditional ones, this is because they deal directly with the compensation to the company of those who caused the accident, shortening the time.

The subscription of online insurance is simple and fast, just send all the requested information directly via the internet and complete them with the paper documentation to be sent later, the advantage is that you will almost immediately receive a provisional mark in order to circulate without problems, then be replaced with the definitive slip.

What are the insurance companies that offer the opportunity to take out insurance online?

Among the first to enter the online market DIRECT LINE is the one that currently covers the largest number of nations in the world, there are about 50 countries covered, among the 10 most important companies for the collection of insurance premiums, in Italy it is present by many years.

The AXA Group founded the Quixa brand to enter the online insurance market in 2008, combining the dynamism of online with the more classic figure of the personal consultant who follows customers in every moment of the insurance relationship with the company.

ConTe. It operates in Italy by offering insurance coverage for what concerns RC Cars and Motorcycles, which can be combined with a wide range of options and guarantees, despite being a brand of the Admiral Group plc company based in Great Britain, it is also present in the territory Italian with a physical office in Rome.

Together with DIRECT LINE, Linear Assicurazioni is among the first brands to have appeared on the online insurance market in Italy, headed by Gruippo Unipol, and offers consumers a wide catalog of policies for vehicle insurance coverage with ample possibility of customization and guarantee of quality.

The Zurich group, one of the main players in the global insurance sector, has been offering its Zurich Connect solution since 1997 by selling insurance policies online without the use of intermediaries, this allows it to guarantee the quality and safety of coverage for its consumers.

The Groupama company also arrived in Italy from France with all its insurance capabilities and quality recognized worldwide. Here, after the merger with Nuova Tirrena, it created Groupama Assicurazioni S.p.a which operates in the online market with very advantageous offers.

The online insurance market is constantly evolving, the large Italian and international historical groups have definitely shifted their interest to the internet with the creation of specific brands and divisions specialized in online insurance, this has brought even greater security to the field and also bringing consumers warier of relying on online companies.

Investment Independent

There are also fashionable trends in investments that keep things moving. Investors should not allow themselves to be influenced here, stick to their strategy and, above all, spread risk intelligently.

Short-term trends can be profitable – let us remind you of the dot-com bubble – but also involve the risk of not getting out in time and losing the nice profits again. On the other hand, a missed entry can prove just as fatal. Investors who want to live a quieter life should not orientate themselves towards the mainstream, diversify – and stay calm.

From human nature and rapid trends

Human nature is regularly the subject of a wide variety of studies, for example the tendency to parrot, which is referred to as the information cascade: The awareness that our own knowledge cannot be comprehensive prompts us humans to listen to other, supposedly better informed – Ultimately, this is what advertising with prominent faces is based on. If the advertising medium is trustworthy, this promotes the sale of the respective product.

However, what is promised does not always have to prove to be sound, even if a number of consumers have been convinced. In return, it is problematic to stand against the mainstream: If celebrities give their voice to critical opinions, they also get attention, but are quickly sidelined. Against this background it becomes clear that only a few people in public life oppose prevailing opinion at all – even if they actually know better.

Success lies in calm – also when investing

Another success factor for the emergence of new trends is the frequency with which a message is conveyed: Information is considered safe if it is repeated often enough from different sides. Then they are memorized and can be retrieved more quickly – this is how a zeitgeist develops that can reflect regionally different opinions on the same topic.

The drastic corrections made in recent years, for example after the dot-com bubble burst, show that dangerous bubbles can quickly inflate in this way.

Investors should rather stick to the Hungarian financial expert André Kostolany (1906-1999), who figuratively recommended stocking up on high-quality stocks and not touching them for many years. Incidentally, he also foresaw the great upheavals that the New Economy would entail, and warned against any involvement.

Intelligent risk diversification is just as important for the success of an investment as perseverance and patience: setting up your own portfolio broadly and distributing it across different risk classes has proven time and again to be an effective means.

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