strategic bussiness management Essay

2726 Words11 Pages
STUDENT NUMBER-00387834
ASSIGNMENT NAME- INTERNATIONAL FINANCIAL MANAGEMENT.

A Report to the Finance Director of Quick Nourish Plc. Supermarket. Chain (QN) for presentation to the Directors to address concerns raised at the recent Board Meeting

DATE: 3RD MARCH 2014

NUMBER OF WORDS—2,500 WORDS.

TABLE OF CONTENTS PAGES
1. Introduction -------------- 2
2. Body of Report -------------- 4
3. Conclusion -------------- 7
4. Appendices ---------------
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The most commonly used instrument for hedging are Forward Rate, Futures Rate and currency Options. According to Jean Folger (2012), Derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, index or security. Then currency derivatives are a contract whose prices are partially derived from the value of the underlying currency that it represents. And firms especially MNC’s commonly take positions in currency derivatives to hedge their exposure to exchange rate risk. Jeff, M. & Roland, F. (2011).
(B.) A Comparison between Futures and Forward Rate. Futures Contracts are contracts specifying a standard volume of a currency to be exchanged on a specific settlement date. A forward contract is an agreement between a corporation/firm and a commercial bank to exchange a specified amount of a currency at a specified exchange rate on a specified date in the future. In comparison both represents a pledge to make a certain transaction at a future date. The exchange of asset occurs on a date specified in the contract. Forwards are a common instrument to hedge the currency risk by large corporations. A very important feature of the forward contracts is that these
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