option can hedge a firm’s future payables denominated in euros. It effectively locks in the maximum price to be paid for euros. A put option on euros can hedge a U.S. firm’s future receivables denominated in euros. It effectively locks in the minimum price at which it can exchange euros received. 4. Forward versus Currency Option Contracts. What are the advantages and disadvantages to a U.S. corporation that uses currency options on euros rather than a forward contract on euros to hedge its exposure
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Carrefour FIN4812 International Finance Case Analysis CARREFOUR S.A This report is created with a discussion over several important international finance topics for instance‚ interest-rate parity‚ currency risk management‚ regarding description on Carrefour S.A. financing policies as well as hedging strategy. Additionally‚ we also discussed on which currency Carrefour should issue its 10-year‚ 750 million euro‚ annual coupon bond‚ its foreign currency risk exposure and a possible hedging
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An exchange-rate system is the set of rules established by a nation to govern the value of its currency relative to other foreign currencies. The exchange-rate system evolves from the nation’s monetary order‚ which is the set of laws and rules that establishes the monetary framework in which transactions are conducted. When one currency is traded for another‚ a foreign exchange market is established. Multinational corporations are one of the participants in the foreign exchange market. The business
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PSAK 55 : FINANCIAL INSTRUMENTS‚ RECOGNITION‚ & MEASUREMENT | | | | | Authors Stephanni A. Rubyanti 120110090047 Satrio Bayu Pandowo 120110100001 Muhammad Rizky Pratama 120110100009 | CHAPTER 1 BACKGROUND ISSUES Financial instrument is any contract that adds to the value of the entity ’s financial assets and financial liabilities or equity instrument of another entity. Today the financial instrument has been growing by leaps and bounds‚ not only used by financial
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Shadow Banking CEPR‚ October 4‚ 2010 Tobias Adrian‚ FRBNY* with Zoltan Pozsar‚ Adam Ashcraft‚ Hayley Boesky *The views expressed in this presentation are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System. What Are Shadow Banks? • Shadow banks are financial entities that conduct either all three or any one of the classic bank functions: 1. credit transformation‚ 2. maturity transformation‚ 3. liquidity
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sales of $184.6 billion. The company is trying to accurately calculate the risk of a potential devaluation to the ARS. In doing so the company had to decide between two options on how to proceed; was it worth the costs to increase the size of GM’s hedge position beyond the standard policy or should GM Argentina rely on other approaches to cope with the expected devaluation? Appraisal of GM’s Passive Hedging Strategy GM’s passive hedging strategy is reflective of its policy to focus on its underlying
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Foreign Exchange Exposure Factors Affecting Euro Currency over time There are many key factors which can affect the value of the Euro currency over time. Germany’s economy seems to also be a major player in relation to the Euro currency. One of the factors differentials in inflation‚ can affect the currency as countries with lower inflation rates would have increases in the value of their currency while countries with higher inflation rates would experience depreciation in their currency. Therefore
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When we hear or see the name Robin Hood‚ we think of the heroic outlaw in the English folklore who‚ according to legend‚ was a highly skilled archer and swordsman. Traditionally depicted as being dressed in Lincoln green‚ he is often portrayed as “robbing from the rich and giving the poor” alongside his band of Merry Men. Robin Hood became a popular folk figure in the late-medieval period‚ and continues to be widely represented in literature‚ films and television. The nonprofit organization located
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3 months to hedge the $75m purchase costs. • The organisation wants to protect itself for 2 years (i.e. 1 year for planning and 1 year for building). • The organisation wants to protect against rising interest rates‚ so would like to pay fixed (i.e. Payer swaption). We know that‚ if we win the tender‚ we will purchase land costing $75m in 3 months’ time. This land will eventually be sold at the completion of the construction phase in 2 years and 3 months’ time. So‚ we can hedge this potential
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Risk arbitrage (or merge arbitrage) is a trading strategy related to M&A transactions. For example‚ if an M&A transaction is carried out by means of share exchange between the buzzer and the target‚ then an arbitrageur may short sell buyer’s stocks and purchase stocks of the target. Until the acquisition is completed‚ the stock of the target typically trades below the purchase price. After the merger is completed‚ the target’s stock will be converted into stock of the acquirer based on the
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