------------------------------------------------- FE Hedging Strategies at GM Should MNCs hedge foreign exchange rate risk? Multinational firms hedge foreign exchange risk in order to ensure operational and financial functionality. A MNC should hedge foreign exchange risk so it can prevent cash flow effects of the foreign firm and the decline in value of the equity holder because of the movements in exchange rates. It will also help them to reduce transaction costs when obligated to make payments
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into the future contracts and options. Future contract or option is suggested for MML who wants to hedge 50% of the production of gold and copper in March and April. In order to meet MML’s management request of low options premium payment‚ MML is advice to use put bear spread and strangle as their options combination strategy. 1.0 Introduction Metal Mining Ltd (MML)
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DEA4700 © Professor Alan Hedge‚ Cornell University‚ January 2011 Job Strain Index (JSI) Moore‚ J.S. and Garg‚ A. (1995) American Industrial Hygiene Journal 56:443-58. DEA4700 © Professor Alan Hedge‚ Cornell University‚ January 2011 JSI Ratings 1. Intensity of Exertion 2. Duration of Exertion 3. Efforts per Minute 4. Hand/Wrist Posture 5. Speed of Work 6. Duration of Task per Day Moore‚ J.S. and Garg‚ A. (1995) American Industrial Hygiene Journal 56:443-58. DEA4700
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G.W.‚ Toft‚ K.B. 2002. How Firms Should Hedge. Review of Financial Studies 15‚ 1283-1324 Campa‚ J.M.‚ Goldberg‚ L.S. 1999. Employment versus Wage Adjustment and the U.S. Dollar. New York University Working Papers 99-07‚ Leonard N. Stern School of Business DeMarzo‚ P.M.‚ Duffie‚ D. 1991. Corporate Financial Hedging with Proprietary Information. Journal of Economic Theory‚ 53‚ 261-285 DeMarzo‚ P.M.‚ Duffie‚ D. 1995. Corporate Incentives for Hedging and Hedge Accounting. Review of Financial Studies
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and losses are included in the reported net income. B) translation gains and losses are included in stockholder’s equity. C) translation gains and losses should be not considered. D) none of these. 4. Which of the following reflects a hedge of net receivables in British pounds by a U.S. firm? A) purchase a currency call option in British pounds. B) buy pounds forward. C) borrow U.S. dollars‚ convert them to pounds‚ and invest them in a British pound deposit. D) purchase a current
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Exposure Forward Market Hedge Money Market Hedge Options Market Hedge Hedging Foreign Currency Payables Forward Contracts Money Market Instruments Currency Options Contracts Cross-Hedging Minor Currency Exposure Hedging Contingent Exposure Hedging Recurrent Exposure with Swap Contracts Hedging through Invoice Currency Hedging via Lead and Lag Exposure Netting International Finance in Practice: Riding Shifting Waves of Currency Should the Firm Hedge? International Finance
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Instruments. This is perhaps one of the most significant projects because it actually redefines many major provisions within the already complex FRS 129 standard that include removing some of the classification of financial instruments‚ derecognition‚ hedge accounting and offsetting of financial assets and liabilities. The objective of IFRS 9 is to establish principles for the financial reporting of financial assets and financial liabilities. An entity shall apply this IFRS for all items within the scope
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public (ie. its customers) in order to "soften the blow" of the political costs which are often imposed on banks. b) Because the majority of the voting public are also customers of one of the big four banks in Australia (Commonwealth‚ NAB‚ ANZ & Westpac)‚ external political costs are often imposed on the banking industry. Because banks make such large profits‚ they are seen as "villains" by the public - providing a big target for politicians to aim at. PAT predicts that governments will act in a
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Tiffany & Company Case Analysis I. Statement of Issue Should Tiffany hedge against translation risk from their Japanese subsidiary? II. Relevant Facts • Establishment of Tiffany-Japan with new responsibility of setting yen prices and managing currency risk. • Eurodollar 3-month forward rate 3.25% Euroyen 3-month forward rate 3.1875 • Yen/Dollar spot rate ¥106.3500 3-months forward ¥106.3300 • 94 SEP call price 1.99 (100ths of a cent per yen‚ ¥6‚250‚000/contract) • 93.5 SEP put price
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Multiple Choice Questions (5 Points Each): Q. 1 Under the gold standard of currency exchange that existed from 1879 to 1914‚ an ounce of gold cost $20.67 in U.S. dollars and £4.2474 in British pounds. Therefore‚ the exchange rate of pounds per dollar under this fixed exchange regime was (a) £4.8665/$. (b) £0.2055/$. (c) always changing because the price of gold was always changing. (d) unknown because there is not enough information to answer this question. Answer:
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