Foreign exchange hedging is used by businesses to manage their currency exposure. If a business needs to buy or sell one currency for another, they are exposed to fluctuations in the foreign exchange market that could affect their costs (or revenues) and ultimately their profit. By booking a hedge, businesses protect an exchange rate against a specified sum for a desired timescale, providing businesses with certainty. There are different hedging strategies and range of products that can be used and it all depends on the businesses objective and the exposure they are trying to protect. A business would hedge their FX exposure to protect its profit margin from market volatility. It is most common in businesses that have an exposure to a secondary currency and have fixed prices on their products or services. Companies like Apple use hedging periodically which is a risk as the timing has to be right in order not to lose millions with a company like Apple. A business may decide not to hedge if they do not have enough visibility to forecast their currency requirements. Alternatively, a business may have the ability to reflect the market movement in their pricing, whereby they pass on any currency risk to the customer or supplier.
But that’s because I deliberately chose a non-disturbing example. When Einstein invented General Relativity, he had almost no experimental data to go on or a phenomenon to explain, except the precession of Mercury’s perihelion. And Einstein did not use that data, except at the end.
Einstein came up with the theory of Special Relativity using the following principle: You begin by saying, “It doesn’t seem reasonable to me that you can tell, in an enclosed box, how fast you and the box are going. Since this number shouldn’t be observable, it shouldn’t exist in any sense.” You then observe that Maxwell’s Equations invoke a seemingly absolute speed of wave propagation, c, commonly referred to as “the speed of light”. So, you reformulate your physics in such fashion that the absolute speed of a single object no longer meaningfully exists, and only relative speeds exist. I am skipping over quite a bit here, obviously, but the point still remains.
Einstein, having successfully done away with the notion of your absolute speed inside an enclosed room, then set out to do away with the notion of your absolute acceleration inside an enclosed box. It seemed to Einstein that there shouldn’t be a way to differentiate, in an enclosed room, between the room accelerating eastward while the rest of the universe stays still, versus the rest of the universe accelerating westward while the room stays still. And because inertial mass and gravitational masses are exactly equivalent gravity can be viewed as a kind of inertia. The Earth should then go around the Sun in some equivalent of a “straight line”. This requires space-time in the vicinity of the Sun to be curved. And of course, the new theory had to obey Special Relativity, and conserve energy, and conserve momentum, etc.
Einstein spent several years grasping the necessary mathematics to describe curved space-time. Then he wrote down the simplest theory that had the properties Einstein thought it should have—including properties no one had ever observed, but that Einstein thought fit in well with the character of other physical laws.
How impressive was that?
Well, let’s put it this way. In some fraction of alternate Earths proceeding from 1800, perhaps a sizeable fraction, relativistic physics could have developed in an entirely different way. We can imagine that Newton’s original “interpretation” of the motion as relative to an absolute ether prevailed. We can imagine that various corrective factors, themselves unexplained, were added on to Newtonian gravitational mechanics to explain the precession of Mercury—attributed, perhaps, to distortions of the ether. Through the decades, further corrective factors would be added to account for other astronomical observations. Sufficiently precise atomic clocks in airplanes would reveal that time ran a little faster than expected at higher altitudes and more corrective factors would be invented.
