Evaluating Transaction Exposures and Hedging Solutions for Importing Steel at Construction and Materials Trading Joint Stock Company.

The Balance of Payments in India mainly relies on services exports, remittances and the course capital flows, both foreign direct investments (FDI) and FII. It is very essential that all market participants, such as banks and other intermediaries be provided with the wherewithal so that they can undertake a risk management in a way that is scientific. One of the ways to access domestic, foreign exchange markets is to hedge on the underlying foreign exchange exposures. In addition, the facilities that are available as the booking of forward contracts were included in the domestic forex market in order to evolve and acquire volumes and depth (Sumanth, 2012). Some of the newer hedging instruments have put in place swaps and options in the

In order to reduce risk, the company is using two hedging derivatives: forward contracts and put options to sell dollars. The aim of the paper is to determine an appropriate hedging policy which answers two main questions: how much to hedge, and in what proportions of forwards

Nestlé S.A. is a Swiss company and owns a prestigious position being the world’s leading nutrition, health and wellness group (Nestlé, 2016). According to its annual report (2015), this company is exposed to many risks caused by movements in foreign currency exchange rates, interest rate and market prices. The foreign exchange risk comes from transactions and translations of foreign operations in Swiss Francs (CHF). The interest rate risk faces the borrowings at fixed and variable rates. The market price risk comes from commodity price and equity price. The former risk arises from world commodity market for the supplies of coffee, cocoa beans, sugar and others. The later risk arises from the fluctuations of the prices of investments held. (Nestle annual reports, 2015). Thus, financial derivatives instruments are used by this multinational corporation in order to hedge these risks.

The trend in exchange rates affect the amount of money a company pays to import and export products. Within the industry of playground equipment, the focus will be on imports due to the high volume of playground manufacturers being located outside of the United States. When the exchange rate fluctuates a company could spend less on exports, but more for imported products. With many of the manufacturers of playground equipment being foreign based, the exchange rate directly affects a company’s purchasing power. The exchange rate that will be focused on is the United States (Dollar) and Denmark (Danish Krone) due to one of the top competitors in the playground industry being located in Denmark. Figure X will show the fluctuations that can occur within a year. Firms in this industry will find that most of the products they produce or sell are affected by exchange rates since either the raw material for those products or the

One of the risk MNCs faced is the financial risk involved with a foreign exchange market, specifically transaction exposure. The MNC is exposed to this risk when they have to make payments or receive payments in another country’s domination currency (Doupnik and Perera, 2015). The currency transaction can create uncertainty with respect to the cash flow associated with the fluctuation of the exchange rate. For example if the MNCs made a sale today in Greece for 100 euro. Then when they receive payment three months later, the foreign exchange rate has decrease in value, and as a result of the fluctuation in foreign currency exchange rate the company has a loss when it convert back to its’ home currency and thus has exposed to the transaction risk.

To study this issue, the authors used a measure of foreign exchange rate exposure that was developed in a prior study to measure the exposure of domestic firms. They selected currency baskets and market indices in order to help make a determination of the firm's exposure, therefor they used secondary sources and proxies to make their determinations. The authors based on their assumptions on prior research, and sought to account for industry effects and other firm characteristics.

A long-term strategic plan to manage Two Brother Bhd. exchange rate Risk was using operating exposure. It is also called economic exposure, which examine measures the operating exposure arises through unexpected changes in both operating and financing cash flows. The firm’s requires forecasting and analysing all the firm’s future individual transaction exposures together with the future exposure of all the firm’s competitors and potential competitors. To anticipate and influence the effect of unexpected changes in exchange rate on a firm’s future cash flows, management can diversify the firm’s operating and financing base and also change the firm’s operating and financing policies.

Three different kinds of researches and an analysis based on the same is undertaken. The first analysis includes two cases showing price determination and a decision regarding acceptance or rejection of the procurement price level based on sale margin. The second research is based on a questionnaire which shows an inference for each answer. The third research is based on a comparison and contrast of trade policies between MMTC Ltd. and State Trading Corporation which is into similar line of business. The major findings of the researches include the facts that the exchange risk in purchase as well as sale transactions in MMTC is very high due to currency fluctuations and Nearly 70% exposure in case of imports and 50% exposure in exports are hedged by so that benefits of positive fluctuations can also be

Introduction Overview of the hedging techniques In the financial market, almost all of companies need to face the currency risk. In order to manage the currency risk, companies will use different hedging techniques, such as financial and operational hedging techniques. For example, money market, futures contracts, options and forwards contracts are commonly used by firms, as well as operational hedging techniques. All of 4 types of financial hedging techniques are short-term hedge. Money market is a part of financial markets for assets involved in short-term borrowing,lending, buying and selling. Its features are high liquidity, lower risk, such as treasury bills. Futures contracts are future transaction for buying or selling, and made

This term paper will start with a short review of the literature on corporate risk management and hedging policies and then move on to a description of the model developed by DeMarzo and Duffie and its rationale. Then, their findings and propositions will be presented followed by the conclusion.

1 Part A Part B Part C 10 11 Part D Part E Preliminaries: Conventions, notation, and basic concepts Currency markets and the behavior of the exchange rate Markets for exchange-rate derivatives and the hedging decision Markets for fixed income securities and the financing decision International money and bond markets Swap markets Markets for equities and the portfolio investment decision Foreign direct investment

benchmarks and performance, and best practices for managing currency risk. In section IV, we offer an overview of the main hedging instruments in the OTC and exchange-traded markets. In section V, we provide data on the use of various derivatives instruments and hedging practices by US firms. In section VI, we conclude by

It was observed during the recent emerging market crises that as soon as an inflexible exchange rate and other financial sector weaknesses became apparent in an economy, institutional investors and currency speculators were attracted toward it, making a currency crisis imminent (Das 1993).  Exchange rates create a risk to a business like Unilever. A bad exchange rate creates the need for Unilever to increase the prices; a positive exchange rate gives a firm the chance to earn more income.  Unilever always monitors the financial status of the country they operate in, it always checks for any changes in the exchange rate and other economic indicators. The company’s local strategy is based from the exchange rate.  Since exchange rates are unpredictable, Unilever makes sure that it has contingency plans to ensure that any abrupt change in the exchange rates would not cost

Great Eastern Toys is a company in Hong Kong that exports a huge percent of its total sales to the North American and European markets and hence is exposed to currency risk. Previously, the company was occupied with expanding their business and the company 's management had never given much attention to currency risk until their recent meeting with their banker. The banker pointed out that the depreciation of the European currencies during the previous two years had resulted in a substantial loss of income. The company 's management was indeed convinced that they should begin to devote more time and manage their currency position. In this report, we are going to explore the different options for Great Eastern Toys to hedge

The foreign exchange market is the oldest and most liquid money markets to ever exist having participants from banks, investment companies, and multinational corporations among others. This has increased daily transaction figures standing to approximately $1.2 trillion per day. In addition, the ever changing market conditions have forced foreign exchange dealers to modify trading procedures and operational procedures to help in managing the ever present risks.