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Explain how multinational companies can reduce the foreign currency risk by hedging.
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- What is the difference between technology risk and operational risk? How does internationalizing the payments system among banks increase operational riskWhat do you know about arbitrage opportunity? Discuss with examples. Also, present a scenario of any type of international arbitrage if possible. If so, how would it be executed and how would market forces be affected? Does arbitrage opportunity destabilize foreign exchange markets?Does Arbitrage destabilize foreign exchange markets? Support your logic about that statement
- When a firm enters a transaction that need to be settled in foreign currency, what are the risks that they are exposed to? What are the possible ways for a firm to avoid those risks and what will be the effect?What are the measures that can be set in place by Fast Moving Consumer Goods Companies to manage foreignexchange rate risk?How can the company use currency options to hedge against exchange rate risk?
- Compare the strategies of pooling risk and diversification as methods of reducing the risks of international lending.Discuss the condition under which exchange rate changes may actually reduce the risk of foreign investment.“Countertrade is used as a substitute for foreign direct investment”. Discuss
- under what circumstances can how an international company can use 'leads and lags' to protect itself against foreign exchange risk.Give reasons why multinational corperations expand overseas and how they manage the exchange rate riskForeign exchange risk or exchange rate risk is a financial risk that occurs when a financialdeal is denominated in a currency other than that of the base currency of the company.Explain the following types of risks that international firms are exposed to:a. Transaction riskb. Translation riskc. Economic risk
