FX Hedging Cost Calculator
FX hedging cost calculator for cross-border e-commerce sellers: compare no hedge, forward contract and option hedge, compute settlement gains/losses and hedging cost.
FreeOnline Tool
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How to Use
- Enter the order amount and pick the currency (USD, EUR, GBP, JPY or HKD). All settlement results are shown in CNY.
- Enter the current spot rate (how many CNY per 1 unit of foreign currency).
- Choose the hedging method: for a forward contract enter the forward rate (or the forward points directly - the two fields sync automatically, positive means premium, negative means discount); for an option hedge enter the option premium rate as a percentage of the order amount.
- Enter an assumed expiry spot rate as a scenario to compare how the three plans differ under exchange rate movement.
- Read the four result cards - settlement without hedge, settlement with hedge, hedging gain/loss (hedged minus unhedged) and hedging cost - plus the three-plan comparison table.
- Click Copy Result to copy the full calculation, or Load Sample Data for a quick demo.
Features
- Three-plan comparison: no hedge, forward contract and option hedge are compared in one table by settlement rate and amount, with the selected plan highlighted.
- Forward rate and forward points sync automatically: enter either one and the other updates, no manual conversion needed.
- Option model: the strike price is simplified to the current spot rate. If the expiry rate is below the strike, the option is exercised to protect the floor; otherwise it expires and the spot rate is used; the premium is deducted in both cases.
- Transparent hedging cost: the forward plan shows the spread cost (spot minus forward, times order amount; negative means a premium gain), the option plan shows the premium amount.
- Gain/loss color coding: results are colored green or red so the direction of the P&L is obvious at a glance.
- One-click copy: generates a text summary of all inputs and outputs for pasting into reports or chat tools.
Use Cases
Decide whether locking a forward rate is worth it
Compare the locked forward rate with the expected expiry rate before collecting payment, and quantify the spread cost to see whether hedging protects or loses money.
Estimate option hedging cost
Enter the premium rate and a rate scenario to measure the premium as a share of the order amount, and see the outcome of both exercising and not exercising.
Protect against currency depreciation
When you expect the CNY to strengthen, use a forward or option to lock a settlement floor and compare the net proceeds and cost of both methods.
Analyze an appreciation scenario
Assume the expiry rate goes up to check whether not hedging is actually better, helping you judge the timing of locking.
Compare multiple currencies
Keep the same order amount and switch between USD, EUR and GBP to quickly compare hedging cost across currencies.
FAQ
How is the forward hedging cost calculated?
A forward contract has no explicit fee; the cost is the difference between the forward rate and the current spot rate: spread cost = order amount x (spot rate - forward rate). It is positive when the forward rate is below spot (discount) and negative when above spot (premium gain).
What is the strike price of the option?
This tool simplifies the strike price to the current spot rate. If the expiry rate is below the strike, the option is exercised and settlement uses the strike rate; otherwise it expires and settlement uses the expiry rate. The premium is deducted in both cases.
Why can hedging settle less than not hedging?
If the actual rate at expiry is higher than the locked forward rate, not hedging would settle more. A negative hedging gain/loss means the lock-in is worse in that scenario - that is exactly the signal for judging lock-in timing.
What should I enter for the expiry spot rate?
It is a scenario assumption used to simulate how rate movement affects the three plans. Use your expected rate for a baseline, or pessimistic/optimistic rates to explore the risk range.
What simplifications does the model make?
The option strike is simplified to the current spot rate; margin requirements and trading fees are not included. The forward contract settles at a fixed rate and bank quoting spreads are not considered. Always use the actual rates quoted by your bank or platform.