Chapter 11, Problem 3BIC

Leads are deliberate early payments of amounts due to be paid in foreign currency to overseas suppliers, or other foreign currency payments. Leads can avoid the risk that the sterling cost of these payments may rise if the amounts of the payments are quoted in foreign currency and the foreign currency increases in value Under what circumstances can how an international company can use ‘leads and lags’ to protect itself against foreign exchange risk.

A bank engaged in the foreign currency business is normally exposed to currency risk, but will also be exposed to these additional risks except: a. Liquidity risk b. Market risk c. Credit risk d. Interest rate risk