In today’s dollarized world with huge international trade exchange of currency has become inevitable. In fact the international trade volume has increased by some 10 to 12 time over the last few decades.
Bank & other financial institutions help the transactions process of international trade. Thereby most of the today’s bank has foreign exchange division or branch. When a bank takes position in a currency against another currency, the risk that exchange rate can change overtime to adversely affect the value of the bank’s position on a particular currency is called foreign exchange risk.