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6. Hedging Translation Exposure. Explain how a firm can hedge its translation exposure.
7. Limitations of Hedging Translation Exposure. Bartunek Co. is a U.S.-based MNC that has European subsidiaries and wants to hedge its translation exposure to fluctuations in the euro's value. Explain some limitations when it hedges translation exposure.
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6. Hedging Translation Exposure. Explain how a firm can hedge its translation exposure.
ANSWER: A firm can hedge translation exposure by selling forward the currency of the firm's foreign subsidiary. Thus, if the foreign currency depreciates, the translation loss will be somewhat offset by the gain on the short ...
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