New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

International Finance Exposure

by: Precious Notetaker

International Finance Exposure

Marketplace > University of Memphis > Finance > > International Finance Exposure
Precious Notetaker
University of Memphis
GPA 3.16

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

This set of notes uses tables to describe scenarios to using hedging instruments.
International Finance
Vivek Sharma
Class Notes
transaction, exposure, International, finance
25 ?




Popular in International Finance

Popular in Finance

This 3 page Class Notes was uploaded by Precious Notetaker on Tuesday April 26, 2016. The Class Notes belongs to at University of Memphis taught by Vivek Sharma in Spring 2016. Since its upload, it has received 22 views. For similar materials see International Finance in Finance at University of Memphis.


Reviews for International Finance Exposure


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 04/26/16
International Finance Vivek Sharma written by Precious Fox Managing Exposure (Transaction, Translation, and Economic) Technique To Hedge Payables To Hedge Receivables Futures Purchase currency futures Sell a currency futures representing the currency and representing the currency and amount related to payables amount related to receivables Forwards Negotiate a forward contract to Negotiate a forward contract to purchase the amount of foreign sell the amount of foreign currency needed to cover the currency that will be received as payables a result of the receivables Money Market Borrow local currency and Borrow the currency convert to currency denominating the receivables, denominating payables. Invest convert it to the local currency, these funds until they are needed and invest it. Then pay off the to cover payables loan with cash inflows from receivables Currency Option Purchase a currency call option Purchase a currency put option representing the currency representing currency and amount related to payables amount related to receivables The chart aboves shows different ways risk can be hedge based on the type of technique it is and whether it is payables or receivables. When deciding whether to use a money market hedge or a forward, pick the one that would be more feasible for you. If the interest rate parity hold and there are no transaction costs, then the money market hedge will yield the same results. Important to remember: the forward premium reflects interest rate differential between two currencies. Type of Operation Recommended Action (When Recommended Action (When foreign currency has a greater foreign currency has a greater impact on cash inflows) impact on outflows) Sales in Foreign Currency Units Reduce Foreign Sales Increase Foreign Sales Reliance on Foreign Supplies Increase foreign supply orders Reduce foreign supply orders Proportion of debt structure Restructure debt to increase debt Restructure debt to reduce debt representing foreign debt payments in foreign currency payments in foreign currency Transaction exposure – exchange rate risk when converting net foreign cash inflows to US dollars or purchasing currencies to send payments Economic exposure – any impact of exchange rate fluctuations on a firm's future cash flows Translation Exposure – MNC translates subsidiary's financial data to its home currency for consolidated financial statements Operations restructuring involves shifting the sources of costs or revenue to other locations in order to match cash inflows and outflows in foreign currencies. Certain companies' future expenses are more senstiive than future recenue to the possible values of a forein currency. The company can reduce economic exposure by increasing sensitivity of revenue and decreasing sensitivity of expenses to ecvhange rate movements. Restructuring operations is more comple thatn feding for a currency transaction. Real Cost of Hedging = cost of hedging payables – cost of payables if not hedged Translated earnings = subsidiary earnings * weighted average exchange rate Gain on forward contract = (amount received from forward sale) – (amount paid to fulfill contract obligation) Limitations of Hedging Translation Exposure Include: Inaccurate Earnings Forecasts Inadequate Forward Contracts for Some Countries Accounting Distortions Increased Transaction Exposure


Buy Material

Are you sure you want to buy this material for

25 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."

Allison Fischer University of Alabama

"I signed up to be an Elite Notetaker with 2 of my sorority sisters this semester. We just posted our notes weekly and were each making over $600 per month. I LOVE StudySoup!"

Jim McGreen Ohio University

"Knowing I can count on the Elite Notetaker in my class allows me to focus on what the professor is saying instead of just scribbling notes the whole time and falling behind."

Parker Thompson 500 Startups

"It's a great way for students to improve their educational experience and it seemed like a product that everybody wants, so all the people participating are winning."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.