Optimization of Hedging Policies with Foreign Exchange Derivatives to Maintain Corporate Financial Stability in Global Markets

Abstract

In the face of increasingly dynamic exchange rate fluctuations in the global market, multinational companies are faced with major challenges in maintaining their financial stability. This study aims to analyze and develop a strategy for optimizing hedging policies using foreign exchange derivatives to strengthen the company's financial stability. Using a qualitative approach through a literature study method, this study examines concepts, theories, and empirical results from various recent scientific publications. Data sources are obtained from reputable international journals such as Elsevier, SSRN, and Springer, which contain studies related to hedging strategies, the effectiveness of derivative use, and their implications for corporate financial performance. The results of the analysis show that the use of derivatives such as forwards, swaps, and options can reduce earnings volatility, increase cash flow predictability, and strengthen market perceptions of the company's credibility. Factors that influence the effectiveness of hedging include exchange rate volatility, type of exposure, financial structure, and the quality of the company's risk management. This study also highlights the importance of integrating hedging policies into the company's financial system, using quantitative approaches such as Value-at-Risk (VaR), and diversifying derivative portfolios. In addition, natural hedge is a complementary strategy that is worth considering. These findings provide conceptual and practical contributions in supporting more resilient financial decision-making amidst global economic uncertainty. This study concludes with policy recommendations and further research directions that can enrich the discourse on financial risk management in the context of emerging markets such as Indonesia.