Q: Explain the foreign currency swaps and why are they undertaken? Explain the functional currency and…
A: A foreign currency swap, also known as an FX swap, is an agreement between two foreign parties to…
Q: Which of the following provides the link between interest rate parity and unbiased forward rates? A.…
A: Uncovered Interest rate Parity As per uncovered interest rate parity theory the difference in…
Q: A) What is the geographical location of the foreign exchange market? B) What are the two main types…
A: Foreign exchange market is the market for trading in currencies. It is the largest and the most…
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: Indirect Intervention How can a central bank use indirect intervention to change the value of a…
A: Central bank can use indirect intervention to change the value of the currency by making necessary…
Q: Explain the followings: a. Floating Exchange Rates b. Pegged or…
A: The price of a country's currency in reference to the currency of another country. When countries…
Q: discuss the motives a company may have for engaging in currency and intrest rate swaps
A: A swap is a two-party derivative transaction that includes the exchange of pre-agreed cash flows. It…
Q: Describe what is meant by the virtualization of traditional trade finance instruments.
A: First of all we need to understand what is Trade Finance Instruments: It is a payment instrument and…
Q: Define currency appreciation
A: Answer: The meaning of currency appreciation is nothing but an rise of one currency’s value…
Q: 1. What is the optimum currency area? 2. What is the specie-flow mechanism?
A: Standard disclaimer-Hi there, Thanks for posting the questions. As per our Q&A guidelines, must…
Q: How can the company use currency options to hedge against exchange rate risk?
A: Those companies which have exposure to foreign markets hedge their risk with currency swap forward…
Q: A foreign currency loan is a typical example for O a. Currency Risk O b. Interest rate risk…
A: A foreign currency loan is one in which you borrow money in a foreign currency, such as Swiss…
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: Define Foreign exchange risk.
A: The term foreign exchange risk is defined as, the risk of an ominous variation in the settlement…
Q: Consider the following statement: "Arbitrage from currency trade could exist only under capital…
A: Arbitrage Arbitrage is the practice of purchasing and selling an asset on separate platforms,…
Q: why a organisation should consider hedging net payables or net receivables with currency options…
A: Answer: Hedging is nothing but an investment risk management strategy that reduces or controls the…
Q: Which statement is correct regarding fair value hedges and cash flow hedges of a foreign currency…
A: Fair value hedges are used to mitigate risk of changes in the fair value of assets or liabilities.…
Q: What is the difference (term of investment) between Money Market, Bond Market, Equity Market,…
A: Financial markets encompass any marketplace where securities are traded, such as the stock market,…
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: which shall be recognized for each item when foreign currency gain or loss that arises from…
A: Foreign Currency Translation: It is the process of converting one currency into another, which is…
Q: What are some of the transactions or activities that results in the demand of foreign currency
A: In an economy or in a country there are different economic and commercial transactions that lead to…
Q: What term is used to describe the process of reducing foreign exchange risk? Choose the correct.…
A:
Q: explain what economists attribute so much attention to Real Exchange Rates? Provide an answer that…
A: Exchange rates are the rates in which one currency could be exchanged into the currency of another…
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: Explain using illustrations, how various forms of arbitrage can remove any discrepancies in pricing…
A: Arbitrage is the type of trade in which there is purchase and sale of asset in order to generate…
Q: What is the difference (description) between Money Market, Bond Market, Equity Market, Foreign…
A: Money market, bond market, equity market, foreign exchange market and derivatives market are…
Q: why a firm should consider hedging net payables and recivables with currency options rather than…
A: Hedging is the process by which risk can be reduced. Options are the derivative instruments that…
Q: Describe techniques for “hedging” againstlosses from fluctuations in exchange rates.
A: Hedging is the strategies used for reducing the risks and impacts of negative changes or…
Q: Explain how various forms of aribtrage can remove discrepancies in the pricing of currencies
A: Arbitrage is defined as the process of purchasing the security in one market and sells them in some…
Q: Show the different arguments put forward by the proponents and opponents of currency hedging?
A: Following reasons are given by opponents of hedging: Managers cannot outguess the market.…
Q: Define each of the following terms: d. Exchange rate risk; convertible currency; pegged exchange…
A: Introduction: The terms exchange rate, fixed exchange rate system, floating exchange rate are…
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: Explain the following terms. a. ADR and GDR Depository Receipts b. Bid Rate and Ask rate c. Option…
A: Since you have asked multiple questions, we will solve the first question for you as per policy.…
Q: Explain in general terms how various forms of arbitrage can remove any discrepancies in the pricing…
A: "Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: How does the various forms of arbitrage remove discrepancies in the pricing of currencies?
A: Arbitrage is generally the common practice which is used by the investor in order to take advantage…
Explain this function of BSP
-Liquidity management
-determination of exchange rate policy
-lender of last resort
-Currency Issue
Step by step
Solved in 2 steps
- Explain the following: Liquidity management currency issue lender of last resort financial supervision Management of foreign currency reserves Determination of exchange rate policyDefine currency appreciationExchange rate risk is a. The risk associated with the use of debt financing by companies b. The risk of doing business in a particular industry or environment c. The risk of loss due to imports and exports dominated in other currencies d. The uncertainty about the time element, the price concession, and the conversion to cash. ************************** correct answer please.
- Exchange Rates How – using which policies and instruments - does Central Bank regulate exchange rates?why a organisation should consider hedging net payables or net receivables with currency options rather than: forward contracts, and future contracts.Explain what a currency instrument is? Give examples of such currency instrument
- Explain the foreign currency swaps and why are they undertaken? Explain the functional currency and what is a presentation currency.Discuss well about the exchange Rate Mechanisms of currencies; what does it mean “Independent Float” or “Pegged to another currency” mean? Give example for each.Describe techniques for “hedging” againstlosses from fluctuations in exchange rates.
- What causes balance sheet (or translation) exposure to foreign exchange risk? How does balance sheet exposure compare with transaction exposure?Write Notes on the Following A: Off Balance Sheet Assets and Liabilities B: Interest Rate Risk Management C: Sterilized Intervention in Foreign Exchange D: Unsterilized Intervention in Foreign Exchange E: Balance of PaymentWhat is the difference (financial instruments traded) between Money Market, Bond Market, Equity Market, Foreign Exchange Market and Derivatives Market?
