Mba project free: Sudy of foreign exchange and its risk management
EXECUTIVE SUMMARY
A
Multinational company with high currency risk is likely to face financial
difficulties which tend to have a disrupting on the operating side of the
business.
A disrupted
financial conditions are likely to:
- Result in the problem of adverse incentives.
- Weakens the commitment of various stake holders.
Foreign exchange exposure and risk are important concept in the study of
international finance. It is the sensitivity of the home currency value of
asset, liabilities, or operating incomes to unanticitpated changes in the
exchange rates.
Exposure exists
if the home currency values on an average in a particular manner. It also
exists where numerous currencies are involved.
Foreign exchange
risk is the variance of the home currency value of items arising on account of
unanticipated changes in the exchange rates.
The derivative
instruments like forwards, futures and options are used to hedge against the
foreign exchange risk of the Multinational companies.
The original
derivatives contract of International Finance is the ‘Forward exchange
contract’. Forward Foreign exchange is a traditional and popular risk
management tool to obtain protection against adverse exchange rate movements.
The exchange rate is ‘locked in’ for a specific date in future, which enables
the person involved in the contract to plan for and budget the business
expenses with more certainty.
Forward exchange
market, has since the 1960s, played the role of linking international interest
rates. Today, however, Forward contract have to share other instruments and
markets for arbitrage and for hedging. These newer derivative instruments
include Futures, Options and Swaps.
To download the complete project report please click on the download button below:
No comments:
Post a Comment