Use of Financial Derivatives for Risk Hedging (Currency Risk) By Companies in The Gambia

Abstract

The aim of this research is to find out if financial derivatives (Futures, Forwards, Options, and SWAPS) are used by company (ies) in The Gambia to hedge against forex risk. From a sample of 3 commercial banks and 1 Islamic Bank, their Income Statements, as well as Balance Sheets for the year ended 2016, was examined. Findings from the research revealed   none usage of any of the above-named derivatives, with forex dealings being carried out over-the-counter and on a spot basis. The government Treasury securities   (T-bills and Sukuk Al- Salam) was found to be the only available financial instrument in The Gambia; an economy with only a money market (the market for securities whose lifespan within a year- The Gambia government bills).

Keywords: The Gambia, Financial Derivatives, and Currency Risk hedging