Hedging foreign currency exposure
Article Abstract:
One method available to treasury managers in hedging long-term foreign currency exposures is long-date forward contracts, which have a maturity of one year or more. Because the long-date market has fewer buyers and sellers than the conventional market, and because long-dates are traded on a negotiated basis, it is important that long-date rate quotes be carefully evaluated. Three techniques for evaluating long-date quotes, which are described, are: the comparative approach, the interest rate approach, and the intuitive approach.
Publication Name: Cashflow Magazine
Subject: Business
ISSN: 0196-6227
Year: 1985
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Foreign exchange options: hedging foreign currency exposure
Article Abstract:
Foreign exchange options, which have been gaining in popularity since 1981, allow the possibility of unlimited upside gain while limiting the downside currency fluctuation risk to the cost of the option's premium. Over-the-counter options have been available since 1983, and these offer the greatest amount of flexibility. The foreign exchange option premiums are based on the following five factors: time value, intrinsic value, currency volatility, relative interest rates, and supply and demand.
Publication Name: Cashflow Magazine
Subject: Business
ISSN: 0196-6227
Year: 1985
User Contributions:
Comment about this article or add new information about this topic:
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