Management Of Currency Fluctuations

Essay specific features

 

Issue:

Business

 

Written by:

Delores G

 

Date added:

December 14, 2012

 

Level:

University

 

Grade:

A

 

No of pages / words:

6 / 1526

 

Was viewed:

9981 times

 

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Essay content:

To measure the transaction exposure there are two steps; 1. Determining the net amount of cashflows in each foreign currency : The company has to determine the net amount of cash inflows because there may be cases which different subsidiaries can have equal inflows and outflows of the same currency which will make that currency’s risk negligible...
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So by projecting the net cashflows of each currency we will be aware of the amount of cash we have in each currency but this information alone does not mean anything as the transaction risk also depends on the volatility of the currency. As an example we may have lot much more net cash flows in Euros but if Yen’s volatility is higher than Euro’s then we may have more risk in Yen rather than Euro...
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