Use of Derivatives in Toyota

INTERNATIONAL FINANCIAL MARKETS *“USE OF DERIVATIVES IN A CHOSEN COMPANY*” {draw:a} TABLE OF CONTENTS {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} 10. 11. 12. 13.REFERENCES AND BIBLIOGRAPHY TOYOTA MOTOR CORPORATION 1. INTRODUCTION *2. FOREIGN EXCHANGE RISK IN *TOYOTA {draw:frame} http://www.indexmundi.com/xrates/graph.aspx?c1=JPY&c2=USD&days=5475 2.2 *De*rivative products used by for foreign exchange risk Translation Risk Translation risk management Transaction Risk Transaction risk management Non derivative management 2.2 Derivative products used for foreign exchange risk a) Foreign exchange forward contracts b) Foreign currency options Toyota uses currency option to exchange the money denominated in one currency to exchange money denominated in other currency at a pre-agreed exchange rate(Eun,C.S,p.114). It is different from the forward contract in that Toyota has right but not the obligation to exchange the currency and options have premiums and hence costlier than forward contracts. Foreign currency borrowing Foreign currency swaps 2.3 Effectiveness of Foreign Currency Exchange Rate Risk Management. *2.4 Alternative strategies to manage Foreign Exchange risk of *Toyota a) Futures Contracts b) Leading and Lagging c) Netting Netting can be used to minimise foreign exchange risk. Netting is beneficial when large number of foreign exchange transactions occurs between subsidiaries of companies such as Toyota (Eiteman,D.K,p.2001). Netting is basically maintaining equal level of foreign payables against foreign receivables. The payment that remains exposed to foreign exchange risk can be

References: AND BIBILIOGRAPHY