Evaluating Hedging Techniques for Effective Risk Management in Global Payment Networks

Abstract

Global payment networks underpin the seamless flow of transactions across borders, facilitating international trade and commerce. However, they are inherently exposed to significant risks such as currency volatility, geopolitical uncertainties, and systemic financial disruptions. Effective hedging techniques are crucial to ensuring the operational stability and financial resilience of these networks. This paper evaluates the effectiveness of various hedging strategies, including forward contracts, options, swaps, and dynamic hedging. Through comprehensive analysis and experimental simulations, this study demonstrates that a hybrid approach combining multiple hedging techniques can significantly mitigate risk, optimize costs, and improve operational outcomes. The findings contribute to the understanding of risk management practices in global payment networks, offering insights for financial institutions and multinational corporations.