toexchangeratefluctuations(国际金融管理-山东.pptVIP

Measuring Exposure ToExchange Rate Fluctuations Chapter Objectives To discuss the relevance of an MNC’s exposure to exchange rate risk; To explain how transaction exposure can be measured; To explain how economic exposure can be measured; and To explain how translation exposure can be measured. Is Exchange Rate Risk Relevant? Purchasing Power Parity Argument Exchange rate movements will be matched by price movements. PPP does not necessarily hold. Is Exchange Rate Risk Relevant? The Investor Hedge Argument MNC shareholders can hedge against exchange rate fluctuations on their own. The investors may not have complete information on corporate exposure. They may not have the capabilities to correctly insulate their individual exposure too. Is Exchange Rate Risk Relevant? Currency Diversification Argument An MNC that is well diversified should not be affected by exchange rate movements because of offsetting effects. This is a naive presumption. Is Exchange Rate Risk Relevant? Stakeholder Diversification Argument Well diversified stakeholders will be somewhat insulated against losses experienced by an MNC due to exchange rate risk. MNCs may be affected in the same way because of exchange rate risk. Is Exchange Rate Risk Relevant? Response from MNCs Many MNCs have attempted to stabilize their earnings with hedging strategies, which confirms the view that exchange rate risk is relevant. Online Application For current and historic exchange rates, as well as implied currency volatilities, visit /pihome/statistics/. Types of Exposure Although exchange rates cannot be forecasted with perfect accuracy, firms can at least measure their exposure to exchange rate fluctuations. Exposure to exchange rate fluctuations comes in three forms: Transaction exposure Economic exposure Translation exposure Transaction Exposure The degree to which the value of future cash transactions can be affected by exchange rate fluctuations is referred to as transaction exposure（交易风险）. To measure tra