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As business becomes increasingly global more and more firms find it necessary to pay careful attention to foreign exchange exposure and to design and implement appropriate hedging strategies.
Member rating: No Rating | Words: | Submitted: Mon Dec 22 2003
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As business becomes increasingly global more and more firms find it necessary to pay careful attention to foreign exchange exposure and to design and implement appropriate hedging strategies. Exchange rate risk is the unexpected exchange rate changes creating variability in the domestic currency value of current and future cash flows of a company Foreign exchange risk management begins by identifying what items and amounts a firm has exposed to risk associated with changes in exchange rates. An asset, liability, profit or expected future cash flow stream is said to be exposed to exchange risk when a currency movement would change, for better or for worse, its home currency value. The term exposure used in the context of foreign exchange means that a firm has assets, liabilities, profits or expected future cash flow streams such that the home currency value of assets, liabilities, profits or the present value in home...
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