Explain two ways in which a firm can hedge against a currency transaction exposure.

      

Explain two ways in which a firm can hedge against a currency transaction exposure.

  

Answers


Kavungya
i) Invoicing in home currency. A company exporting goods or services may invoice in its local currency
so that payments made by the buyer are fixed and not affected by exchange rate fluctuations.
ii) Leading and lagging
Leading refers to an immediate payment or the granting of very short term credit. Lagging
refers to the granting of long term credit.
iii) Multi lateral netting and matching
iv) Forward contracts
v) Money market hedges
vi) Currency futures
vii) Currency options
viii) Currency swaps
Kavungya answered the question on April 19, 2021 at 20:20


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