Week 5 Integrative Problems Team A

Week 5 Integrative Problems Team A - firm has to inform its...

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3) What can a firm do to reduce exchange risk? A firm can reduce the exchange risk by using the forward market hedge. The forward market hedge essentially matches, according to Keown, et. al (2005), “the liability or asset position against an offsetting position in the forward market” (p. 789). To do this a
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Unformatted text preview: firm has to inform its banker that it either needs to buy or sell foreign currency at a future date. In return the banker will give the firm a forward quote. Using the forward market hedge an organization can pay for something in the future right now and avoid any fluctuations in the foreign exchange....
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