SYNOPSIS Macau, founded in 1557, is a Territory under Portuguese Administration located in the South China Coast. It belongs to the Pearl River Delta, neighbouring to Hong Kong (as the 4t largest financial centre in the world) as well as to the Province of Guangdong (with its Special Economic Zones in progress). Being in the middle of those remarkably dynamic economic areas, Macau has also accelerated its financial as well as economic systems through massive infrastructure developments, expansion on trade, hotel and tourism industries. As a free market area, the flow of funds is done in and out of the Territory in the absence of regulatory obstacles by the Government, thus most investments within are settled, not necessarily, in local currency - the Pataca. This research attempts to promote off-balance-sheet methods of hedging foreign exchange exposure in Macau. Special attention will be given to limitations that exist in doing so. The Thesis begins with a brief explanation of the currency exchange contracts coupled with definitions of two different types of risk.