Define foreign currency hedges.

Q: What is meant by Foreign Exchange Markets?

A:

Q: Explain pegged exchange rates

A: Exchange rate is the value of one country’s currency in exchange of other country’s currency.

Q: What adjustments might be made due to exchange rate riskand political risk to the domestic cost of…

A: The question is based on the concept of international risk management in cost of capital. An…

Q: What are forward contracts? How can they beused to manage foreign exchange risk?

A: Risk refers to the uncertainty regarding the implications of any activity.

Q: What can be understood from Foreign Exchange Rates?

A: Foreign exchange rate: A foreign exchange rate is the comparative value among two currencies. Merely…

Q: Discuss how changes in the expected exchange rate affects current exchange rate

A: The rate at which one country currencies is exchanges with the currencies of another country, such…

Q: what is Accounting for Foreign Currency Transactions

A: A transaction is said to be a foreign currency transaction when such transaction takes place between…

Q: State the different types of foreign exchange risk that can be hedged and how foreign currency…

A: Different types of foreign exchange risks: Transaction risk Translation risk Economic risk

Q: Define currency appreciation

A: Answer: The meaning of currency appreciation is nothing but an rise of one currency’s value…

Q: What is the rationale for the remeasurement of foreign currency transactions?

A: Remeasurement: Remeasurement refers to re-evaluation of a physical asset or foreign currency in the…

Q: Illustrate how to synthesize a forward hedging strategy by using only the money markets, in order to…

A: The idea of forward hedging is to lock-in the price (or exchange rate) today for a future foreign…

Q: What are pegged exchange rates?

A: Pegged exchange rate: It is otherwise called a fixed exchange rate, which is a kind of conversion…

Q: What is foreign trade balance?

A: Answer: A foreign trade balance is nothing but the net dollar value of commodity exports minus…

Q: Explain how exchange rate fluctuations affect the return from a foreign market measured in dollar…

A: When doing business outside country of home currency dollars there is risk of change in exchange…

Q: interest rate and currency swap dealer

A: Risk confronting refers to some uncertainty or potential loss chances that will go to happen in…

Q: Does Arbitrage destabilize foreign exchange markets? Support your logic about that statement

A: Solution- F = S*1+if/1+id  F= Forward Exchange Rate  S= Current Spot Exchange Rate  Id= Interest…

Q: Who are the players in the foreign exchange market?

A: The currency market, often known as the foreign exchange market, is a global decentralized or…

Q: Define domestic currency

A: The domestic currency is a currency that is the local currency for every country. Every Trade…

Q: Define short exposure and explain the relationship between the variability of the domestic currency…

A: Domestic currency is referred to as the legal tender in an economy as well as issuance through the…

Q: Critically evaluate the role of exchange rate systems in influencing FDI and trade levels.

A: Foreign direct investment:  One of the primary methods of contemporary capital internationalization,…

Q: “Investors engage in forward exchange transactions to hedge against foreign currency risk. EXPLAIN…

A: A futures contract is a customized contract between two parties to buy or sell an asset at a price…

Q: What is meant by spot rate in case of foreign currency transaction?

A: Spot rate is the rate at which currencies can be exchanged right away. It is the current market…

Q: How do you determine and calculate return and risk on foreign exchange transactions

A: Foreign exchange transactions are those transactions which are undertaken between citizens of one…

Q: does it reduce forei

A: Financial instruments can be regarded as capital bundles that can be traded, or as assets that can…

Q: What is foreign exchange rate?

A: The foreign exchange rate is the relative representation of domestic currency in terms of value of…

Q: What is the value of a unit of domestic currency against foreign currency? A) Parity B) Exchange…

A: The exchange rate is the percentage of foreign currency in domestic currency units, or, in another…

Q: Discuss the condition under which exchange rate changes may actually reduce the risk of foreign…

A: Exchange rate changes are largely unpredictable. Exchange rates are nonstationary and may deviate…

Q: Define the term direct foreign investment?

A: The company is established to make a profit and it always keeps seeking investment opportunities…

Q: Explain how changes in interest rates are likely to affect exchange rates.

A: General Introduction: Exchange rates are very important factor in determining country's economic…

Q: ith practical example ?

A: Currency risk, also called foreign-exchange risk or exchange-rate risk, is the risk that changes in…

Q: What are the advantages or the disadvantages of hedging with currency options as opposed to future…

A: Hedging is used to insulate the investor of the risks of currency fluctuations in an international…

Q: Define convertible currency

A: A convertible currency is the one that is readily available to purchase other currencies and is not…

Q: Explain what is a hedging arrangement and how does it reduce foreign currency risk exposure?

A: Hedging is an arrangement made to reduce the risk of foriegn exchange. It is a strategy to offset…

Q: Discuss the following types of currency risks giving suitable examples: i. Economic risk ii.…

A: EXPLANATION:- Currency Risk Currency ratio is a measurement of loosing money as a result of…

Q: What is the difference between spot and forward exchange rates?

A: Commodity market involves different rates for products depending on the trading transactions. The…

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.