Managing forex risk by using financial derivatives: A study on Indian IT firms

The present paper attempts to identify the ways that the Indian IT companies manage their Forex risk with the use of financial derivatives. This risk cannot be avoided, but can be managed by derivative instruments. The need and approach for managing it depends on the size of exposure and fluctuations in exchange rate. Indian IT sector is known for development of software and it mainly depends on exports. They are required to measure and manage exchange rate risk. Hence, an attempt is made in this paper to fill this gap, by documenting the management of forex exposure by using derivatives of IT firms in India.