A U.S. exporting firm may use foreign exchange futures to hedge its exposure to exchange rate risk.

Question:

A U.S. exporting firm may use foreign exchange futures to hedge its exposure to risk. Its position in futures will depend in part on currently outstanding bills to its customers denominated in foreign currency. In general, however, should its position in futures be more or less than the number of contracts necessary to hedge these bills? What other considerations might enter into the hedging strategy?

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...