Chap12Management of Economic Exposure(国际财务管理,英文版).pptVIP

Chapter Outline Three Types of Exposure How to Measure Economic Exposure Operating Exposure: Definition An Illustration of Operating Exposure Determinants of Operating Exposure Managing Operating Exposure Three Types of Exposure Economic Exposure Exchange rate risk as applied to the firm’s competitive position. Transaction Exposure Exchange rate risk as applied to the firm’s home currency cash flows. The subject of Chapter 13. Translation Exposure Exchange rate risk as applied to the firm’s consolidated financial statements. The subject of Chapter 14 How to Measure Economic Exposure Economic exposure is the sensitivity of the future home currency value of the firm’s assets and liabilities and the firm’s operating cash flow to random changes in exchange rates. There exist statistical measurements of sensitivity. How to Measure Economic Exposure If a U.S. MNC were to run a regression on the dollar value (P) of its British assets on the dollar pound exchange rate, S($/￡), the regression would be of the form: How to Measure Economic Exposure The exposure coefficient, b, is defined as follows: How to Measure Economic Exposure The exposure coefficient shows that there are two sources of economic exposure: the the variance of the exchange rate and the covariance between the dollar value of the asset and exchange rate. Operating Exposure: Definition The effect of random changes in exchange rates on the firm’s competitive position, which is not readily measurable. A good definition of operating exposure is the extent to which the firm’s operating cash flows are affected by the exchange rate. An Illustration of Operating Exposure Recently, there was an enormous shortage in the shipping market from Asia, due to the Asian currency crisis. This affected not only the shipping companies, which enjoyed “boom times”. But also retailers, who experienced increased costs and delays. An Illustration of Operating Exposure Note that the exposure for the retailers has two componen