If the firm ,NAB economists,had exposures in currencies such as Brazilian Real or Indonesian Rupiah, what options does the firm have in terms of hedging/foreign exchange risk management
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If the firm ,NAB economists,had exposures in currencies such as Brazilian Real or Indonesian Rupiah,
what options does the firm have in terms of hedging/foreign exchange risk management
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- What are the criteria for selecting between hedging or diversification to manage risk in the foreign exchange market?How can the company use currency options to hedge against exchange rate risk?If the firm had exposures in currencies such as Brazilian Real or Indonesian Rupiah,what options does the firm have in terms of hedging/foreign exchange risk management?
- 1. Explain the differences and similarities between Forward, Futures, andOptions. Then why can there be a Long Term Funding Deficit related to a company's cash flows? and Explain the meaning of international parity conditions, and why it can be used to predict exchange rates. and what is the meaning of foreign exchange exposure and types of foreign exchange exposure faced by multinational companies.Explain how exchange rate fluctuations affect the return from a foreign market measured in dollar terms. Discuss the empirical evidence on the effect of exchange rate uncertainty on the risk of foreign investment.Foreign exchange risk may be best defined as:a. the chance of value change in foreign exchange ratesb. the chance that the demand for your currency will dropc. the chance that exchange rates will be fixedd. the political risk posed by foreign governments
- How may the domestic cost of capital for a foreign venture be adjusted to account for currency rate risk, political risk, and nation risk?Which hedging strategy uses an exchange rate agreed to today for future delivery of currency to minimize the financial institution’s risk exposure? a. Hedging with forwards. b. On balance sheet hedging. c. Off balance sheet hedging. d. Spot hedging.What 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?
- Explain how exchange rate fluctuations affect the return from a foreign market measured in dollar terms. Discuss the empirical evidence on the effect of exchange rate uncertainty on the risk of foreign investment. Would exchange rate changes always increase the risk of foreign investment? Discuss the condition under which exchange rate changes may actually reduce the risk of foreign investment.In what ways do investors quantify the risk levels between domestic and foreign securities? What asset allocation strategies and weightings would you consider when investing in international securities? Explain your reasoning.Transaction exposure: A. measures the extent to which foreign exchange volatility may affect a firm's future ongoing revenues and costs. B. measures the effects of FX changes on the balance sheet of the firm. C. refers to the extent to which the value of the firm's cash flows may be affected by changes in the exchange rate. D. tries to measure the impact of unexpected exchange rate fluctuations on the net present value of the firm's future cash flows.