business through a U.S. exchange utilizing U. finance what is a derivative.S. dollars (USD). Now the financier is exposed to exchange-rate danger while holding that stock. Exchange-rate danger the threat that the value of the euro will increase in relation to the USD. If the worth of the euro increases, any revenues the investor realizes upon offering the stock become less valuable when they are transformed into euros.Derivatives that could be utilized to hedge this kind of threat include currency futures and currency swaps. A speculator who expects the euro to value compared to the dollar might profit by using a derivative that increases in worth with the euro. When utilizing derivatives to hypothesize on the cost movement of a hidden possession, the investor does not require to have a holding or portfolio existence in the hidden asset.