Translation and Transaction Exposure

Translation and Transaction Exposure . International Corporate Finance P.V. Viswanath For use with Alan Shapiro “Multinational Financial Management”. Learning Objectives. To define translation and transaction exposure To describe the four principal currency translation methods.

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Measuring Accounting Exposure

Measuring Accounting Exposure. International Finance. Dr. A. DeMaskey. Learning Objectives. What are the three different types of foreign exchange exposures? What is accounting exposure and how is it measured?

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Measuring and Managing Translation and Transaction Exposure

Measuring and Managing Translation and Transaction Exposure. Chapter 9. PART I. ALTERNATIVE MEASURES OF FOREIGN EXCHANGE EXPOSURE: Accounting and Economic Risk. I. ALTERNATIVE MEASURES A. TYPES 1. Accounting Exposure:

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MEASURING AND MANAGING FOREIGN EXCHANGE EXPOSURE

MEASURING AND MANAGING FOREIGN EXCHANGE EXPOSURE. THE REAL EXCHANGE RATE. Real rates are adjusted for price changes:.

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Transaction Exposure

Transaction Exposure. Foreign exchange exposure is a measure of the potential for a firm's profitability, net cash flow, and market value to change because of a change in exchange rates.An important task of the financial manager is to measure foreign exchange exposure and to manage it so as to maxi

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Managing Transaction Exposure

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Managing Transaction Exposure

8. Managing Transaction Exposure. Chapter Objectives This chapter will: A. Compare the commonly used techniques to hedge payables B. Compare the commonly used techniques to hedge receivables C. Explain how to hedge long-term transaction exposure

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Measuring and Managing Economic Exposure

Measuring and Managing Economic Exposure. Chapter 10. CHAPTER 10 MEASURING AND MANAGING ECONOMIC EXPOSURE. CHAPTER OVERVIEW I. FOREIGN EXCHANGE RISK AND ECONOMIC EXPOSURE II. THE ECONOMIC CONSEQUENCES OF EXCHANGE RATE CHANGES III. IDENTIFYING ECONOMIC EXPOSURE

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Measuring and Managing Foreign Exchange Exposure

Measuring and Managing Foreign Exchange Exposure. International Financial Management. Dr. A. DeMaskey. Learning Objectives. What are the three different types of foreign exchange exposures? How is translation and transaction exposure measured?

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Transaction Exposure

Transaction Exposure. Risk due to lags in payments Hedging strategies. Exposure. Transaction exposure changes in the value of outstanding contracts Operating exposure (economic exposure) change in the PV of the firm (real exchange rates) Translation exposure (accounting exposure)

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Hedging Transaction Exposure

Hedging Transaction Exposure. Forward Contracts. Forward contracts are purchases/sales of currencies to be delivered at a specific forward date (30,90,180, or 360 days) Example CAD/USD .7641 1 month .7583 3 months .7563 6 months .7537 12 months .7525.

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Managing Economic Exposure and Translation Exposure

12. Managing Economic Exposure and Translation Exposure. Chapter Objectives. Explain how an MNC’s economic exposure can be hedged Explain how an MNC’s translation exposure can be hedged. 2. Managing Economic Exposure.

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Translation Exposure

Translation Exposure. Chapter Ten Eitman, Stonehill, and Moffett. Translation exposure. foreign currency financial statements different line items translated at different exchange rates term of different assets & liabilities translated at historical rates current rates.

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Managing Transaction Exposure

11. Managing Transaction Exposure. Chapter Objectives. Compare the techniques commonly used to hedge payables Compare the techniques commonly used to hedge receivables Describe limitations of hedging

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Managing Transaction Exposure

Managing Transaction Exposure. Exposure = Risk Managing Risk = “Hedging”. Types of FX Exposure. Hedging With…. Transaction Risk Example. Foreign RECEIVABLES: Boeing (USA) sells 747 Jet to British Airways (UK) for £10m payable in 1 year. Forward Market Hedge.

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Measuring and Managing Economic Exposure

Measuring and Managing Economic Exposure. Chapter 11. PART I. FOREIGN EXCHANGE RISK AND ECONOMIC EXPOSURE. I. FOREIGN EXCHANGE RISK Economic exposure focuses on the impact of currency fluctuations on firm’s value.

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HEDGING TRANSACTION EXPOSURE

HEDGING TRANSACTION EXPOSURE. Jennifer Nguyen Carlos Castillo. Case Background. Popescu, Hagi & Associates (PHA) Consulting firm Deals in specialized derivatives DW, Inc. Computer manufacturer No previous consistent hedging program Hires PHA to implement a plan.

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Transaction Exposure

Transaction Exposure. Transaction exposure measures gains or losses that arise from the settlement of existing financial obligations whose terms are stated in a foreign currency.

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TRANSACTION EXPOSURE operating exposure and translation exposure

TRANSACTION EXPOSURE operating exposure and translation exposure. Multinational Business Finance Yinghong.chen@liu.se. 0. Transaction Exposure. Foreign exchange exposure is a measure of

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Managing Transaction Exposure

Managing Transaction Exposure. 11. Chapter. Transaction Exposure. Transaction exposure exists when the future cash transactions of a firm are affected by exchange rate fluctuations. When transaction exposure exists, the firm faces three major tasks:

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Measuring and Managing Foreign Exchange Exposure

Measuring and Managing Foreign Exchange Exposure. International Financial Management. Dr. A. DeMaskey. Learning Objectives. What are the three different types of foreign exchange exposures? How is translation and transaction exposure measured?

617 views • 48 slides