文档介绍：CHAPTER 6
Measuring and Managing Exposure To
Exchange Rate Fluctuations
Libo Yin, School of Finance, Central University of Finance and Economics
Email: ******@
Chapter Objectives
1. Measuring exposure
. To discuss the relevance of an MNC’s
exposure to exchange rate risk;
. To explain how transaction exposure can be
measured;
. To explain how economic exposure can be
measured; and
. To explain how translation exposure can be
measured.
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2. Managing transaction exposure
. To identify the commonly used techniques for
hedging transaction exposure;
. To explain how each technique can be used
to hedge future payables and receivables;
. To compare the advantages and
disadvantages of the identified hedging
techniques; and
. To suggest other methods of reducing
exchange rate risk when hedging techniques
are not available.
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3. Managing economic exposure
and translation exposure
. To explain how an MNC’s economic exposure
can be hedged; and
. To explain how an MNC’s translation
exposure can be hedged.
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Is Exchange Rate Risk Relevant?
Purchasing Power Parity Argument
Exchange rate movements will be matched by
price movements.
PPP does not necessarily hold.
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The Investor Hedge Argument
MNC shareholders can hedge against
exchange rate fluctuations on their own.
The investors may not have complete
information on corporate exposure. They may
not have the capabilities to correctly insulate
their individual exposure too.
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Currency Diversification Argument
An MNC that is well diversified should not be