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Management of Transaction Exposure chapter 13
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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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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?