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    International Finance Currency Risk Techniques

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    Question 1. Defend why, or why not financial managers should apply currency risk techniques.
    Question 2. Design how MNEs can diversity financing.
    Question 3. Assess the determinants of operating exposure.
    Question 4. Examine the re-measurement and translation process.

    Each question needs to be 200 words and the book that I am using is Fundamentals of Multinational Finance by Moffett, Stonehill, & Eiteman.

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    Solution Preview

    Please find the explanation regarding the given questions as below. I hope this response will help you to develop your understanding related to the given topics of International Finance.
    Answer 1
    Financial manager should apply the currency risk techniques because there are lots of advantages of using currency risk techniques. It is a form of potential insurance that can be used by the financial manager to protect the capital from negative happening in global market. Similarly, it also helps to ensure the consistency of cash flows and also makes consistency in production process. By using these techniques, financial manager can manage capital investment because it assures market price for hedgers and protects them against the rising operating costs in foreign nations (Garham, 2014). It enables to make concrete plans on capital formation and expansion by reducing the loss of foreign investment due to currency rate fluctuations. It is also beneficial for the financial manager to use the currency risk techniques because increasing volume of cross-border activity coupled with rising currency volatility bound the financial manager of different MNC companies to use these techniques. It is also helpful to get limits for potential losses without limiting potential gains and for specific earning (Moffett, et.al, 2014). Along with this, it will also enable the financial managers to ensure the protection of cash flows from its operations in foreign countries.
    Answer 2
    Diversity in finance is essential because greater diversity provides significant capability to an organization. Therefore, in order to ...

    Solution Summary

    This response explain why, or why not financial managers should apply currency risk techniques. Also, it is discussed how MNCs can diversity financing. Further, determinants of operating exposure are assessed.