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Management of Transaction Exposure chapter 13

Transaction Exposure. Arises from changes in the value of past contractual obligations in FC (e.g. payables and receivables, loans and deposits)Example: Suppose that on January 1, 2005 Ford is awarded a contract to supply trucks to Dutch army forces. On December 31, 2005, Ford will receive a payme

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Management of Transaction Exposure chapter 13

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Presentation Transcript

    1. Management of Transaction Exposure (chapter 13)

    2. Transaction Exposure

    4. Without hedging

    5. Hedging strategies

    6. Forward market hedge

    7. Forward Market Hedge

    8. Options Market Hedge

    9. Options Market Hedge

    10. Hedging certain future cash flows: Ford example

    12. Options Hedging: importer of British woolens

    13. Hedging through Invoice Currency

    14. Hedging via Lead and Lag

    15. Exposure Netting

    16. Observations

    17. Should the Firm Hedge?

    18. Should the Firm Hedge?

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