Describe Currency Hedging; How it is used in global financing operations?
Not what you're looking for?
Currency Hedging
a. Describe Currency Hedging,
b. How it is used in global financing operations,
c. Describe its importance in managing risks.
At least three sources must be cited (preferably peer reviewed sources).
I am willing to negotiate the credit value for a high quality response to my query. I can also add to the deadline, if necessary.
Purchase this Solution
Solution Summary
You will find the answer to this puzzling question inside...
Solution Preview
a. Describe Currency Hedging,
b. How it is used in global financing operations,
c. Describe its importance in managing risks.
At least three sources must be cited (preferably peer reviewed sources).
Kindly think in the following terms: Currency hedging is a technique used to offset the risks associated with the changing value of currency. The use of currency futures and options transactions to protect the value of investments and cash against fluctuations in exchange rates relative to the currency in which the fund is denominated. A strategy, which aims to reduce an international share or bond portfolio's exposure to exchange rate fluctuation.
Please consider the following In a global financing operations, if a company or a bank is scheduled to receive say 1M Euros after a period of six months and the company does not want to lose money because of foreign exchange fluctuations, the company purchases a put option or a forward contract to purchase 1 M Euros after six months. Now if the value of the Euros increases the company will lose money on the put option and gain money on the actual transaction, thereby protecting itself from unexpected losses. Similarly if the price of the price of the Euros comes down the company will lose on the actual transaction but will gain on the put option and so will not be affected by the price of the Euros.
Buying currency on the spot market may work in favor of American importers ...
Purchase this Solution
Free BrainMass Quizzes
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.
Marketing Research and Forecasting
The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
Production and cost theory
Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.