company through a U.S. exchange utilizing U. what are derivative instruments in finance.S. dollars (USD). Now the financier is exposed to exchange-rate risk while holding that stock. Exchange-rate risk the hazard that the value of the euro will increase in relation to the USD. If the value of the euro increases, any revenues the investor recognizes upon selling the stock end up being less important 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 utilizing a derivative that rises in worth with the euro. When using derivatives to speculate on the price movement of a hidden property, the investor does not require to have a holding or portfolio existence in the hidden possession.