--%>
Assignment Help - homework help

Eliminating exposure of the currency

Banks find it essential in order to accommodate their client’s requirements for buying or selling foreign exchange forward, in several instances for the hedging purposes.  How the bank can eliminate the exposure of the currency it has made for itself by accommodating a client’s forward transaction?

E

Expert

Verified

Swap transactions provide a way for bank in order to diminish the currency exposure in the forward trade.  A swap transaction is defined as the simultaneous sale (or purchase) of the spot foreign exchange beside the forward purchase (or sale) of about same amount of foreign currency.  For example, suppose a bank customer desires to buy the dollars three months forward beside the British pound sterling.  Bank may handle this trade for its customer and concurrently neutralize the risk of exchange rate within the trade by selling (borrowed) the British pound sterling spot against the dollars. Bank may lend dollars for three months up till they are required to deliver against the dollars which it has sold forward.  

   Related Questions in Financial Accounting

  • Q : Case study of a hospitals Radiology

    The typical mid-sized hospital trying to keep its head above water in the increasingly tight health care market. It has determined that a critical area for it in today’s market is customer service. Until eight or nine years ago, hospital’s had a reputation

    		•
  • Q : Micro-level theories regarding cause of

    Identify and elucidate three micro-level theories about the cause of deviance.

    		•
  • Q : Political events affecting the local

    Discuss about the different ways in which the political events in the host country affects the local operations of MNC.

    		•
  • Q : Define Fixed Overhead Variance Give a

    Give a short introduction about the term ‘Fixed Overhead Variance’?

    		•
  • Q : Need for valuing goodwill Need for

    Need for valuing goodwill: If the mutual rights of the partners modifies then the party which makes a sacrifice should be compensated. This basis of compensation is goodwill therefore we require calculating goodwill. Mutual rights change beneath follo

    		•
  • Q : Case study of a pharmaceutical group in

    The XYZ Group, a supplier of pharmaceutical equipment, systems and services, has its head office in London and primary production facilities in the US. The company also has a successful subsidiary in South Africa, which was established in 1990. XYZ South Africa does n

    		•
  • Q : Segmented capital market Assume that

    Assume that your firm is operating in the segmented capital market. State some of the actions that you would recommend to diminish the negative effects?

    		•
  • Q : Meaning of drawing What is the meaning

    What is the meaning of drawing in financial accounting?

    		•
  • Q : Computing overall balance and its

    Discuss how to compute overall balance and explain some of its significance.

    		•
  • Q : Explain Return on Assets or ROA Return

    Return on Assets (ROA): It is an indicator of how gainful a company is associative to its net assets. ROA provides an idea as to how proficient management is at employing its assets to produce earnings. Computed by dividing a company's annual earnings

    		•