International Finance and Accounting Handbook

(a) Transaction Exposure. The typical illustration of transaction exposure involves an export or import contract giving rise to ...

the Bretton Woods system. However, with subsequent changes in the international fi- nancial environment, this translation method ...

change rate throughout the balance sheet. The temporal method provided the con- ceptual base for the first influential translati ...

the majority of its inputs from abroad and ships the bulk of the output outside of the host country will have the dollar as its ...

least one of these reactions is possible within a relatively short time; at other times, the firm is “locked in” through contrac ...

in plant and facilities. Such “commitments” are important criteria in determining the existence and magnitude of exchange risk. ...

inventory in a foreign subsidiary is determined not only by changes in the exchange rate, but also by a subsequent price change ...

Yet another dimension of exchange risk involves the element of time. In the very short run, virtually all local currency prices ...

6.5 MANAGING ECONOMIC EXPOSURE (a) Economic Effects of Unanticipated Exchange Rate Changes on Cash Flows. From this analytical f ...

against these effects? Many companies, such as Japanese auto producers, are now seeking flexibility in production location, in p ...

search in the foreign exchange markets has come a long way since the days when in- ternational trade was thought to be the domin ...

may therefore deviate markedly from the expectation embodied in the present for- ward rate for that maturity. As is indicated in ...

tunities for certain currencies during specified periods (for example, by the use of “filter rules “). However it is also logica ...

corrected. Any predictable, economically meaningful bias would be corrected by the transactions of profit-seeking transactors. T ...

First, there are different tools that serve effectively the same purpose. Most cur- rency management instruments enable the firm ...

any amount, as long as it’s big enough to be worth the dealer’s time, while futures are for standard amounts, each contract bein ...

(d) Currency Options. Many companies, banks, and governments have extensive experience in the use of forward exchange contracts, ...

makers. In contrast to linear instruments like futures and forwards, the value of an option does not depend on the price of the ...

SOURCES AND SUGGESTED REFERENCES Adler, M. “Translation Methods and Operational Foreign Exchange Risk Management” in In- ternati ...

Bodnar, G. M., G. S. Hayt, R. C. Marston, and C. W. Smithson. “Wharton Survey on Deriva- tives Usage by U.S. Non-Financial Firms ...