10T ans ch14 - CHAPTER 14 FOREIGN EXCHANGE RISK Chapter...

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Instructor’s Resource Manual t/aFinancial Institutions Management2e by Lange, Saunders, Anderson, Thomson &Cornett1CHAPTER 14FOREIGN EXCHANGE RISKChapter outlineSources of Foreign Exchange Risk ExposureForeign Exchange Rate Volatility and FX ExposureForeign Currency TradingFX Trading ActivitiesThe Profitability of Foreign Currency TradingForeign Asset and Liability PositionsThe Return and Risk of Foreign InvestmentsRisk and HedgingInterest Rate Parity TheoremMulticurrency Foreign Asset-Liability Positions
Solutions for end-of-chapter questionsQUESTIONS AND PROBLEMS1.What are the four FX risks faced by FIs?
2.What is the spot market for FX?What is the forward market for FX?What is the positionof being net long in a currency?
3.X-IM Bank has EUR 14 million in assets andEUR 23 million in liabilities and has soldEUR 8 million in foreign currency trading.What is the net exposure for X-IM?For whattype of exchange rate movement does this exposure put the bank at risk?
4.What two factors directly affect the profitability of an FI’s position in a foreign currency?
Instructor’s Resource Manual t/aFinancial Institutions Management2e by Lange, Saunders, Anderson, Thomson &Cornett2

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Term
One
Professor
YIP
Tags
Exchange Rate, Volatility, Foreign exchange market, United States dollar, Forward contract, Financial Institutions Management

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