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Unformatted text preview: n hedge
against this risk by using the currency futures, forward, or options markets, but it
is costly to do so, particularly for relatively small amounts. If the exporter is selling to a customer in a developing country—where 40 percent of U.S. exports are
now sold—there will probably be no effective instrument available for protecting
against exchange rate risk at any price. This risk may be further magnified
because credit standards may be much lower (and acceptable collection techniques much different) in developing countries than in the United States.
Although it may seem tempting just “not to bother” with exporting, U.S. companies no longer can concede foreign markets to international rivals. These export
sales, if carefully monitored and (where possible) effectively hedged against
exchange rate risk, often prove to be very profitable. Credit Terms
The terms of sale for customers
who have been extended credit
by the firm.
A percentage deduction from the
purchase price; avail...
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