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article: Foreign exchange option
A foreign exchange option (commonly shortened to just FX option) is a derivative where the owner has the right

in terms of their obligation, but differ from forward contracts in the way they are traded.

Forward[edit]
See also: Forward contract
Swap[edit]

from those people who don't wish to bear it, to those who do.[78] Other economists such as Joseph Stiglitz consider this argument to be based more on politics and a free

that speculators ultimately are a stabilizing influence on the market and perform the important function of providing a market for hedgers and transferring risk market philosophy than on economics

Speculation[edit]
Controversy about currency speculators and their effect on currency devaluations and national economies recurs regularly. Nevertheless, economists including Milton Friedman have argued .[79]

funds and other well capitalized "position traders" are the main professional speculators. According to some economists, individual traders could act as "noise traders" and have a m

this view, it is simply gambling that often interferes with economic policy. For example, in 1992, currency speculation forced the Central Bank of Sweden to raise interest rates for a few days to 500

Gregory Millman reports on an opposing view, comparing speculators to "vigilantes" who simply help "enforce" international agreements and anticipate the effects of basic economic "laws" in

unsustainable financial bubbles or otherwise mishandle their national economies, and foreign exchange speculators made the inevitable collapse happen sooner. A relatively quick collapse might even be preferable to continued economic mishandling, followed by an eventual, larger, collapse

contribute positively to economic growth by providing capital, currency speculation does not; according to % per annum, and later to devalue the krona.[82] Former Malaysian Prime Minister Mahathir

traditional financial instruments like bonds or stocks often is considered to Mohamad is one well known proponent of this view. He blamed the devaluation of the Malaysian ringgit in 1997 on George Soros and other speculators.

In this view, countries may develop . Mahathir Mohamad and other critics of speculation are viewed as trying to deflect the blame from themselves for having caused the unsustainable economic conditions.

Risk aversion is a kind of trading behavior exhibited by the foreign exchange market when a potentially adverse event happens w

Fig.1 Chart showing hich may affect market conditions. This behavior is caused when risk averse traders liquidate their positions in risky assets and shift the funds to less risky assets due to uncertainty.[84]