International Financial Managementsunyu Essay Example | Topics and Well Written Essays - 2000 words

International Financial Managementsunyu - Essay ExampleThese techniques argon ideal for an exporter who wishes to have stable cash flows subject to foreign win over risk. It is concluded that multinational businesses and investors that soak up in import or export of products and services or those that make foreign investments across the global economy should be aware of the risk exposures and the most appropriate hedging st valuegy for each token of risk. It is also suggested that special attention be given to economic exposure because it substantially impact the debaucheds market value and expected future cash flows and even affects the competitive position of a firm that does not sell or operate overseas.By examining a range of academic materials, belatedly published book, magazine articles, journal articles and internet sites on the topic this report identifies the nature of the transfer rate risk faced by an exporter then describe the market strategies available for hedgin g the risk.Foreign exchange exposure comes about if an investor or a firm has an open position (un-hedged condition subject to exchange rate risk) in a foreign currency. There are two types of open position, open want and open short position (Homaifar, 2004). Open long position is one where a firm expects to pay off foreign currency in future while open short position is one where the investor postulate to pay foreign currency in future (Siddaiah, 2009). Foreign exchange risk therefore refers to the calamity or likelihood that a foreign currency may move in a style that is detrimental to the investor. Specific risk in open log position is that the foreign currency may weaken against the domestic currency thereby decreasing the local currency equivalent (Poitras, 2002). On the early(a) hand, specific risk in open short position is that the foreign currency may arm against the domestic currency thereby increasing the domestic currency equivalent