Explain contingent exposure, Financial Management

Assignment Help:

Explain contingent exposure and define the advantages of using currency options to manage this type of currency exposure.

Answer: Companies may come across a state where they may or may not face currency exposure. In this condition, companies need options, not obligations, to buy or sell a specific amount of foreign exchange they may or may not receive or should pay. If companies either hedge by using forward contracts or do not hedge at all, they may face specific currency exposure.


Related Discussions:- Explain contingent exposure

Why total assets equal the sum of total liabilities & equity, Why do total ...

Why do total assets equal the sum of total liabilities and equity?Explain. Assets = Liabilities + Equity Assets are the entities of value a business owns. Liabilities ar

Illustrating a straddle, Options Traded on Legal and General August 14  200...

Options Traded on Legal and General August 14  2009 Share   Price         Exercise      Price    Calls       Puts                                 Sep        Dec        Mar

Risk of portfolio if asset of low correlation are combined, What happens to...

What happens to the riskiness of a portfolio if assets with very low correlations (even negative correlations) are combined? How successfully diversification decreases risk reli

Assigenment, a choice is to be made between the two completing proposal wh...

a choice is to be made between the two completing proposal which require an equal investment of Rs.50000.00 and we are expected t gererate net cash flow as under. Year Project A

Eoq inventory model primary variable, What are the primary variables being ...

What are the primary variables being balanced in the EOQ inventory model?  Explain The primary variables mortal balanced in the EOQ model are ordering costs and carrying costs.

What is risk free rate of return, What is risk free rate of return Ther...

What is risk free rate of return There is a 'risk free rate of return' (also known as time preference rate) which is used to compensate for the loss of not being able to invest

Mathematical property of median, Mathematical Property The sum of the d...

Mathematical Property The sum of the deviations of the items from median, ignoring signs, is the least. For example, the median of 6, 10, 14, 18 and 22 is 14. The deviations fr

Scope of the content of the finance function, Q. Scope of the content of th...

Q. Scope of the content of the finance function? 1) Estimating of the finance requirement: the first task of a finance manager is to estimate and short terms and long terms fin

Explain conversion and competitive effects of exchange rate, Define the con...

Define the conversion and competitive effects of exchange rate changes on the company's operating cash flow. Answer:  The competitive effect: Exchange rate modifications may in

Causes of risks, Q. Causes of Risks 1) Wrong decision of what to invest...

Q. Causes of Risks 1) Wrong decision of what to invest in. 2) Wrong timing of investments. 3) Nature of instruments invested such as shares or bonds, chit funds, benefit

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd