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The foreign exchange market (forex, FX, or currency market) is a global, worldwide-decentralized financial market for trading currencies. Commonly traded instruments include spot, forward, swaps, futures, and options. The FX market is the most liquid financial market in the world. There is no unified or centrally cleared market.
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How to hedge two currency positions
Having two spot currency positions,
short EUR/USD
long GBP/USD
We are looking for a way to diminish the risk of the spread going against us. The basic idea is to invert the positions, namely:
lon …