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