1. Trang Chủ
  2. Tài chính doanh nghiệp
  3. Lecture International finance: An analytical approach (3/e): Chapter 13 - Imad A. Moosa

Lecture International finance: An analytical approach (3/e): Chapter 13 - Imad A. Moosa

Chapter 13 - Foreign exchange risk management. The objectives of this chapter are: To explain why there is concern about foreign exchange risk; to illustrate how to manage short-term transaction exposure using forward hedging, futures hedging, money market hedging and option hedging; to illustrate other techniques of managing short-term and longterm transaction exposure;… Chapter 13 Foreign Exchange Risk Management Objectives • To explain why there is concern about FX risk • To illustrate how to

Thể loại Tài liệu miễn phí Tài chính doanh nghiệp

Số trang 52

Ngày tạo 6/18/2020 6:12:28 AM +00:00

Loại tệp PPT

Kích thước 0.45 M

Tên tệp

Tải Lecture International finance: An analytical appro... (.pdf)

Xem mẫu

  1. Chapter 13 Foreign Exchange Risk Management
  2. Objectives • To explain why there is concern about FX risk • To illustrate how to manage transaction, economic and translation exposure Copyright 2010 McGraw-Hill Australia Pty Ltd PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 13-2
  3. Hedging • Hedging, which is the core risk management operation, is a process whereby a firm can protect itself from unanticipated changes in exchange rates and other sources of risk (cont. Copyright 2010 McGraw-Hill Australia Pty Ltd ) PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 13-3
  4. Hedging (cont.) • The decision to hedge or not to hedge an uncovered or open foreign currency position is basically a speculative decision • It all depends on the expected exchange rate or the movement of the exchange rate between the point in time when the decision is taken and when its effect materialises Copyright 2010 McGraw-Hill Australia Pty Ltd PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 13-4
  5. Why is there no need to worry about FX risk? • If international parity conditions hold, FX risk will not arise • If it is possible to forecast exchange rates accurately, FX risk can be controlled • Shareholders are naturally hedged though diversification Copyright 2010 McGraw-Hill Australia Pty Ltd PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 13-5
  6. Why worry about FX risk? • International parity conditions do not hold • Forecasting exchange rates is rather difficult • Hedging produces a more stable income stream Copyright 2010 McGraw-Hill Australia Pty Ltd PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 13-6
  7. Benefits of hedging • Hedging has a positive effect on the value of the firm • It produces a more stable corporate income stream Copyright 2010 McGraw-Hill Australia Pty Ltd PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 13-7
  8. Managing short-term transaction exposure (financial hedging) • Forward hedging • Money market hedging • Futures hedging • Option hedging Copyright 2010 McGraw-Hill Australia Pty Ltd PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 13-8
  9. Financial hedging • By taking an affecting position on a hedging instrument (forward, etc), the profit/loss on the unhedged position is offset by the loss/profit on the hedging instrument Copyright 2010 McGraw-Hill Australia Pty Ltd PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 13-9
  10. Forward hedging • Forward hedging entails locking in the exchange rate at which payables and receivables are converted from the domestic currency into a foreign currency, and vice versa (cont. Copyright 2010 McGraw-Hill Australia Pty Ltd ) PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 13-10
  11. Forward hedging (cont.) V  KS1 (no­hedge) KS0  (hedge) S  1  S0 Copyright 2010 McGraw-Hill Australia Pty Ltd PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 13-11
  12. Offsetting profit/loss on payables + Long forward S0 S1 F0 Payables – F0   S0 (a)                  (par) (cont. Copyright 2010 McGraw-Hill Australia Pty Ltd ) PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 13-12
  13. Offsetting profit/loss on payables (cont.) + Long forward S0 F0 S1 Payables – F0   S0 (b)                  (premium) (cont. Copyright 2010 McGraw-Hill Australia Pty Ltd ) PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 13-13
  14. Offsetting profit/loss on payables (cont.) + Long forward S1 F0 S0 Payables – F0   S0 (c)                  (discount) Copyright 2010 McGraw-Hill Australia Pty Ltd PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 13-14
  15. Introducing the bid-offer spread Hedge No-Hedge Payables KFa 0 KS a1 Receivables KFb 0 KSb1 Copyright 2010 McGraw-Hill Australia Pty Ltd PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 13-15
  16. Futures hedging • Futures hedging results may differ quantitatively from those of forward hedging • Because of the standardisation of contracts, it may not be possible to hedge the exact amount (cont. Copyright 2010 McGraw-Hill Australia Pty Ltd ) PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 13-16
  17. Futures hedging (cont.) • The due date may not coincide with the settlement date • Marking-to-market introduces some variation Copyright 2010 McGraw-Hill Australia Pty Ltd PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 13-17
  18. Money market hedging • A money market hedge amounts to taking a money market position to cover expected payables or receivables • By borrowing and lending, a synthetic forward contract is created Copyright 2010 McGraw-Hill Australia Pty Ltd PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 13-18
  19. Money market hedging of payables   Payables  (K)  Borrowing  domestic  currency  KS 0 (1 i )     Converting  at spot rate  Loan  Repayment     K (1 i )     Investing at  foreign rate  K    KS 0 (1 i )     (1 i ) Implicit forward rate  S 0 (1 i )     (1 i ) Copyright 2010 McGraw-Hill Australia Pty Ltd PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 13-19
  20. Money market hedging of receivables   Receivables  (K)  Borrowing  foreign  currency  K (1 i )     Converting  at spot rate  Loan  Repayment  KS 0     (1 i )     Investing at  domestic rate  KS 0 (1 i ) K        (1 i ) Implicit forward rate  S 0 (1 i )     (1 i ) Copyright 2010 McGraw-Hill Australia Pty Ltd PPTs t/a International Finance: An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 13-20
nguon tai.lieu . vn
Ngân hàng - Tín dụng Kế toán - Kiểm toán Đầu tư Bất động sản Quỹ đầu tư Đầu tư Chứng khoán Tài chính doanh nghiệp Bảo hiểm Tiêu chuẩn - Qui chuẩn Giáo dục học Kinh tế học Quản trị kinh doanh