Category Archives: RISK MANAGEMENT

RISK MANAGEMENT IN FOREIGN EXCHANGE

QUESTION

Assume that you have been engaged to provide foreign exchange risk management advice to a local firm which exports extensively to Japan, and has just signed a major export contract under which it is due to receive $US 10 million in six months time. Outline the advice you would give this firm on the best ways of managing its US Dollar risk exposure.

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EXCHANGE RATE SYSTEMS OF BATH PLC

QUESTION

A study of the Exchange Rate System and Hedging Against Exchange Rate Risk

SOLUTION

1. Bath PLC

Bath Plc. is a UK based firm which deals with firms in US. The company has a large number of transactions due over the next 5 month and the main objective of the management is to minimise by the risk by using various hedging techniques.   The hedging techniques under consideration are namely

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