BMGT 445 lecture 9

BMGT 445 lecture 9 - BMGT445 ProfessorEthanCohenCole

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Click to edit Master subtitle style 3/1/11 BMGT 445 Professor Ethan Cohen-Cole Lecture 9
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3/1/11 Key concepts FOREX risk
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3/1/11 Background Globalization : more foreign exposure – more risk. FI may have assets or liabilities denominated in foreign currency direct positions in foreign currency Foreign currency holdings exceed direct portfolio investments.
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3/1/11 Foreign Exchange Rate Quotes Price at which one currency can be exchanged for another Direct quote: Example: US$0.8866 per Canadian dollar (C$). Indirect quote: In the US, this means the price of the US dollar in terms of the foreign currency. Example, C$1.1279 per US$.
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3/1/11 Sources of FX Risk Spot positions I own 20 euros Forward positions denominated in foreign currency I agree to buy 20 euros tomorrow Net exposure = (FX assets - FX liab.) + (FX bought - FX sold)
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3/1/11 FX Risk Exposure FI may have positions in spot and forward markets. To hedge f/x risk
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BMGT 445 lecture 9 - BMGT445 ProfessorEthanCohenCole

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