why a organisation should consider hedging net payables or net receivables with currency options rather than: forward contracts, and  future contracts.

Q: What is National Savings Certificate? A. Short-term U.S. government debt obligation B. A fixed-…

A: The correct answer is B. A fixed-income investment scheme:One such investment product that the…

Q: Explain the followings:                          a.    Floating Exchange Rates  b.    Pegged or…

A: The price of a country's currency in reference to the currency of another country. When countries…

Q: discuss the motives a company may have for engaging in currency and intrest rate swaps

A: A swap is a two-party derivative transaction that includes the exchange of pre-agreed cash flows. It…

Q: What is Internal Rate of Return - All Cash Deal?  Please provide examples

A: Internal Rate of Return (IRR)IRR is the annualized effective compounded rate or return that can be…

Q: Which hedging strategy uses an exchange rate agreed to today for future delivery of currency to…

A: Hedging is a financial management strategy help to setoff the risk of making an investment in…

Q: State the different types of foreign exchange risk that can be hedged and how foreign currency…

A: Different types of foreign exchange risks: Transaction risk Translation risk Economic risk

Q: Bills payable and promissory notes are negotiable instruments and are used mostly to replace_____…

A: Bills Payable and promissory notes are negotiable instruments issued for accounts payables. These…

Q: age of over-the-counter products such as swaps or forwards contracts, relative to exchange-traded…

A: Exchanged traded products are traded on stock exchanges where as over the counter products are…

Q: 2. How fixed exchange rate system of UAE is managed? Show this for both surplus and deficit balance…

A: The exchange rate system explains how the exchange rate determines in respect of the other nation's…

Q: Which of the following is not a main core function of the financial system? a. Provide a payments…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Explain the asset channel of monetary policy and analyze its usefulness in the country

A: The question is based on the concept of asset price channel in monetary policy of a country

Q: Illustrate how to synthesize a forward hedging strategy by using only the money markets, in order to…

A: The idea of forward hedging is to lock-in the price (or exchange rate) today for a future foreign…

Q: How is credit risk managed in case of foreign exchange futures contracts? Discuss with the use of an…

A: Credit risk management in foreign exchange (forex) futures contracts is a crucial aspect of…

Q: Distinguish between the spot market and forward market for foreign exchange.

A: The objective of this question is to differentiate between the spot market and the forward market in…

Q: Does the FASB considers options as securities or as cash?

A: FASB is the Financial  accounting  standard  board

Q: Why is writing deep-in-the-money currency options tantamount to short-term financing?

A: A deep in the money option is an options contract where the strike price of the option is…

Q: Which currency regime plays role of counter inflation anchor: Select one alternative: Free…

A: Solution Step (1) Inflation Anchor Conventional wisdom is that a financial organization can anchor…

Q: what is currency issuance in monetary policy? give examples

A: Monetary policy is one of the important policies which is developed with a view to manage and…

Q: Describe the incremental analysis approach for evaluating aproposed credit policy change.

A: Appropriate income statements can be contrasted to assess the difference in credit policy. This can…

Q: Describe the trade-offs of extending credit.

A: Accounts receivable: Accounts receivable refers to the amounts to be received within a short period…

Q: Would you prefer using negotiable instruments as a form of payment rather than using traditional…

A: A negotiable instrument is an archive that ensures installment of a particular measure of cash to a…

Q: Compare and contrast transaction exposure and economic exposure

A: SOLUTION:- Transaction exposure is the danger a MNC faces when it executes a particular exchange…

Q: hedging arrangement and how does it reduce foreign currency risk exposure

A: Foreign currency risk can be defined as the risk of change in the exchange rate of a foreign…

Q: Define spot, forward, and swap transactions in the foreign exchange market and give an example of…

A: The foreign exchange market (also known as the Forex or FX market) is a decentralized global market…

Q: es the most accurate estimate of the net realizable value of the receivables. The reason for it is…

A: Allowance method It is a method for accounting for bad debt expense, where uncollectible accounts…

Q: Which of the following is NOT an indicator used in determining the functional currency? • a.…

A: A practical foreign money is the primary foreign money that a agency conducts its business. As…

Q: What are the main differences between ARMs and FRMs loans? You need to highlight the differences in…

A: Loan which are provides to the borrower either in Adjusted Rate of Mortgage or Fixed Rate of…

Q: Critically evaluate interest rate swap agreements focusing on their significance and advantages in…

A: The agreements to exchange a number of payments on specified periods for a certain time are called…

Q: What is a Letter of Credit? Please discuss how a Letter of Credit work. Why is Letter of Credit…

A: What is a Letter of Credit A letter of credit, sometimes known as a "credit letter," is a guarantee…

Q: 21. What is the upside of utilizing cash in exchange as thought about to deal exchange?

A: The foreign exchange market deals with currency in different countries. It includes the exchange of…

Q: What is an arbitrage opportunity? What types of arbitrage strategies are used by foreign exchange…

A: An investor can profit from price differences of a security or asset between several exchanges or…

Q: credibillity of monetary policies

A: Monetary policy is a policy formulated by the central bank of a country. It stabilizes the supply of…

Q: Critically evaluate the argument that fixed exchange rate regime is better than flexible exchange…

A: Fixed exchange regime refers to that regime in which exchange rate in a country remains fixed…

Q: Explain the following: Liquidity management currency issue lender of last resort financial…

A: The above terms are associated with commercial banks and the Central Bank of the country. The terms…

Q: Financial Institutions have Off-Balance-Sheet acitivities mainly (Commitment Loans; Letter of…

A: Potential Advantages: 1. Off-balance-sheet activities can help financial institutions reduce their…

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.