Chap13Management of Transaction Exposure(国际财务管理,英文版).pptVIP

Chapter Outline Forward Market Hedge Money Market Hedge Options Market Hedge Cross-Hedging Minor Currency Exposure Hedging Contingent Exposure Hedging Recurrent Exposure with Swap Contracts Chapter Outline (continued) Hedging Through Invoice Currency Hedging via Lead and Lag Exposure Netting Should the Firm Hedge? What Risk Management Products do Firms Use? Forward Market Hedge If you are going to owe foreign currency in the future, agree to buy the foreign currency now by entering into long position in a forward contract. If you are going to receive foreign currency in the future, agree to sell the foreign currency now by entering into short position in a forward contract. Forward Market Hedge: an Example You are a U.S. importer of British woolens and have just ordered next year’s inventory. Payment of ￡100M is due in one year. Question: How can you fix the cash outflow in dollars? Money Market Hedge This is the same idea as covered interest arbitrage Money Market Hedge Money Market Hedge Money Market Hedge Suppose you want to hedge a payable in the amount of ￡y with a maturity of T: i. Borrow $x at t = 0 on a loan at a rate of i$ per year. (Note that $x = ￡y/(1+ i￡)T at the spot rate.) ii. Exchange $x for ￡y/(1+ i￡)T at the prevailing spot rate, invest ￡y/(1+ i￡)T at i￡ for the maturity of the payable to achieve ￡y. At maturity, you will owe a $x(1 + i$). Your British investments will have grown enough to service your payable and you will have no exposure to the pound. Money Market Hedge Suppose you want to hedge a ￡ receivable in the amount of ￡y with a maturity of T: i. Borrow ￡y/(1+ i￡)T at t = 0. ii. Exchange ￡y/(1+ i￡)T for $x at the prevailing spot rate. At maturity, you will owe a $y which can be paid with your receivable. You will have no exposure to the dollar-pound exchange rate. Options Market Hedge Options provide a flexible hedge against the downside, while preserving the upside potential. To hedge a foreign currency payable