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Essay

Hedging Risks

Essay specific features

 

Issue:

Business

 

Written by:

Guadalupe K

 

Date added:

December 10, 2015

 

Level:

University

 

Grade:

C

 

No of pages / words:

4 / 869

 

Was viewed:

9707 times

 

Rating of current essay:

 
Essay content:

If the US dollar depreciates year on year then the revenues will be less if we convert it back to Schilling. At this stage given the rising value of the dollar, hedging would in fact make HKK worse off. If HKK were to lock in a forward rate now, it would automatically set the company up for losses. The rates in the forward market are significantly lower than the current exchange rate...
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The rates in the forward market are significantly lower than the current exchange rate. The reason for that is, that the interest rates in the US are higher than in Austria. Consequently the US Dollar has to depreciate in the forward market to meet the no-arbitrage condition. Unless this manufacturing company estimates the dollar to drop significantly in the future, hedging in this instance is going to make HKK even worse off...
displayed 300 characters

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