TOPIC: MULTINATIONAL CORPORATIONS (MNC) INDIVIDUAL ASSIGNMENT LECTURER: NEENA DAS A/P GOGILADAS DATE ASSIGNED: 13th AUGUST 2013 DATE DUE: 27TH MARCH 2015 TABLE OF CONTENTS INTRODUCTION. 3 TYPES OF FOREIGN EXCHANGE EXPOSURE. 5 Transaction Exposure 5 Translation Exposure. 6 Economic Exposure. 7 REASONS FOR MNC TO EXPAND GLOBALLY 8 To Seek for New Markets 8 To Seek New Resources 8 To Seek New Technology 9 To Seek Production Efficiency 9 Global Diversification. 9 FACTORS DISTINGUISH MULTINATIONAL FINANCIAL
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appropriate hedging strategies to protect them. Exchange rate risk is the unexpected exchange rate that may cause an organization to lose or gain income. Currency hedging is a method of minimizing the exchange financial rate risk within an international organization. Global Companies involved in operations should have good understanding of the financial risks that the company could go through prior to starting its venture. Exchange Rate Mechanisms Currency hedging is “a particular hedging strategy
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Ontario Teacher’s Pension Plan Board: Hedging Foreign Currency Exposure Ontario Teacher’s Pension Plan Board: Hedging Foreign Currency Exposure Issue Identification The Ontario Teacher’s Pension Plan (OTPP) is a defined contribution plan that was created in 1917 to provide and administer a pension plan for Ontario school teachers. Sponsored by the Ontario Government and the Ontario Teacher’s Federation‚ the plan currently supports 343‚000 teachers‚ former teachers and pensioners. The recent
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This case analysis deals with number of issues related to this risk exposure such as what is the cash market risk exposure‚ how the risk should be managed i.e. which part of the risk should be hedged and which part of the risk should be taken‚ what alternatives are available for risk management‚ and how these alternatives should be evaluated‚ implemented and monitored. 1. Cash Market Risk Exposure: The cash market risk exposure is an existing or anticipated position in the cash market for which
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grunbichler@zurich.com Chief Risk Officer Forum Contact Details: Via E-mail: secretariat@croforum.org chairperson@croforum.org The report demonstrates that the use of derivatives offers insurance companies a more robust and efficient way to hedge market risk exposures‚ but there are definitive regulatory/accounting obstacles to the full deployment of these strategies‚ perversely discouraging state of the art risk management practices. With this report the Chief Risk Officer Forum is proposing a set of principles
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Solution to ch 7 Answers to End of Chapter Questions 1. Explain the concept of locational arbitrage and the scenario necessary for it to be plausible. ANSWER: Locational arbitrage can occur when the spot rate of a given currency varies among locations. Specifically‚ the ask rate at one location must be lower than the bid rate at another location. The disparity in rates can occur since information is not always immediately available to all banks. If a disparity does exist‚ locational
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controlling local Japanese management. Tiffany would be able to have control over retail price in Japan where historically had higher price. Under the previous arrangement‚ Tiffany contracted Mitsukoshi as the principal retailer in Japan and the transaction of wholesaling to Mitsukoshi was settled in U.S. dollar‚ under the new agreement‚ Tiffany now faced the risk of foreign currency fluctuations. Reasons for Managing Exchange Rate Risk Tiffany should actively manage its yen-dollar exchange rate
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law of supply and demand 2. Provide definitions for the following: a. Transaction exposure Transaction exposure measures changes in the value of outstanding financial obligations incurred to a change in exchange rates but not due to be settled until after the exchange rates change. So it deals with changes in cash flows that results from existing contractual obligations. b. Translation exposure Translation exposure is the potential for accounting-derived changes in owner’s equity to occur
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INTRODUCTION Financial Market A financial market is a broad term describing any marketplace where the buyers and sellers participate in the trade of assets such as equities‚ bonds‚ currencies and derivatives. Financial markets are typically defined by having transparent pricing‚ basic regulations on trading‚ costs and fees‚ and market forces determining the prices of securities that trade. Types of Financial Market Capital Market Trader in instrument with an original maturity of more than
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QUESTION #1 Does the Universal Circuits’ Irish controller have a convincing argument for the weakness of the dollar? Why or why not? How would you interpret the evidence? The controller of the Irish division does have a valid point when stating that the U.S. dollar is in a vulnerable position due to the fact that its trade deficit is currently in excess of $100 billion and growing. (see Exhibit 1). While Universal Circuits’ chief financial officer‚ Joe Merrill‚ is correct when stating that
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