Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
United States
A$
Subsidiary
Financials
Headquarters A$
Consolidated
Financials
Subsidiary
Financials
US$
A$
Germany
Subsidiary Financials
3
A. Accounting exposure
reflects past decisions of the firm.
B. Economic exposure
1. Focuses on future impact of
exchange rate changes.
2. Not all future cash flows appear on
the firms balance sheet.
A.
B.
C.
D.
E.
F.
Risk shifting
Currency risk sharing
Currency collars
Cross-hedging
Exposure netting
Forward market hedge or money
market hedge (MMH)
G. Foreign currency options
8
A. RISK SHIFTING
1.
2.
3.
4.
C. CURRENCY COLLARS
1. Collar contracts
- bought to protect against currency
moves outside the neutral zone.
10
E. EXPOSURE NETTING
1. Protection can be gained by selecting
currencies that minimize exposure
2. Netting: MNC chooses currencies that
are not perfectly positively correlated.
3. Exposure in one currency can be
offset by the exposure in another.
14
17
18
3. Exposure netting
a. Offsetting exposures in one
currency with exposures in the
same or another currency
b. Gains and losses on the two currency
positions will offset each other.
C. Implications:
1. If nominal rates change with an equal
price change, no alteration to cash
flows.
2. If real rates change, it causes relative
price changes and changes in
purchasing power.
A decline in the real value of a currency makes
exports and import-competing goods more
competitive.
An appreciating currency makes imports and
export-competing goods more competitive.
23
24
ECONOMIC CONSEQUENCES
The impact on operating exposure of a real
rate change depends upon pricing flexibility
and
1. Price elasticity of demand
2. Degree of product differentiation
3. The ability to shift production
and the substitution of inputs
27