Q: Explain the foreign currency swaps and why are they undertaken? Explain the functional currency and…
A: A foreign currency swap, also known as an FX swap, is an agreement between two foreign parties to…
Q: Which of the following provides the link between interest rate parity and unbiased forward rates? A.…
A: Uncovered Interest rate Parity As per uncovered interest rate parity theory the difference in…
Q: A) What is the geographical location of the foreign exchange market? B) What are the two main types…
A: Foreign exchange market is the market for trading in currencies. It is the largest and the most…
Q: What are forward contracts? How can they beused to manage foreign exchange risk?
A: Risk refers to the uncertainty regarding the implications of any activity.
Q: Indirect Intervention How can a central bank use indirect intervention to change the value of a…
A: Central bank can use indirect intervention to change the value of the currency by making necessary…
Q: Explain the followings: a. Floating Exchange Rates b. Pegged or…
A: The price of a country's currency in reference to the currency of another country. When countries…
Q: discuss the motives a company may have for engaging in currency and intrest rate swaps
A: A swap is a two-party derivative transaction that includes the exchange of pre-agreed cash flows. It…
Q: Describe what is meant by the virtualization of traditional trade finance instruments.
A: First of all we need to understand what is Trade Finance Instruments: It is a payment instrument and…
Q: Define currency appreciation
A: Answer: The meaning of currency appreciation is nothing but an rise of one currency’s value…
Q: 1. What is the optimum currency area? 2. What is the specie-flow mechanism?
A: Standard disclaimer-Hi there, Thanks for posting the questions. As per our Q&A guidelines, must…
Q: How can the company use currency options to hedge against exchange rate risk?
A: Those companies which have exposure to foreign markets hedge their risk with currency swap forward…
Q: A foreign currency loan is a typical example for O a. Currency Risk O b. Interest rate risk…
A: A foreign currency loan is one in which you borrow money in a foreign currency, such as Swiss…
Q: What is the rationale for the remeasurement of foreign currency transactions?
A: Remeasurement: Remeasurement refers to re-evaluation of a physical asset or foreign currency in the…
Q: Define Foreign exchange risk.
A: The term foreign exchange risk is defined as, the risk of an ominous variation in the settlement…
Q: Consider the following statement: "Arbitrage from currency trade could exist only under capital…
A: Arbitrage Arbitrage is the practice of purchasing and selling an asset on separate platforms,…
Q: why a organisation should consider hedging net payables or net receivables with currency options…
A: Answer: Hedging is nothing but an investment risk management strategy that reduces or controls the…
Q: Which statement is correct regarding fair value hedges and cash flow hedges of a foreign currency…
A: Fair value hedges are used to mitigate risk of changes in the fair value of assets or liabilities.…
Q: What is the difference (term of investment) between Money Market, Bond Market, Equity Market,…
A: Financial markets encompass any marketplace where securities are traded, such as the stock market,…
Q: Does Arbitrage destabilize foreign exchange markets? Support your logic about that statement
A: Solution- F = S*1+if/1+id F= Forward Exchange Rate S= Current Spot Exchange Rate Id= Interest…
Q: which shall be recognized for each item when foreign currency gain or loss that arises from…
A: Foreign Currency Translation: It is the process of converting one currency into another, which is…
Q: What are some of the transactions or activities that results in the demand of foreign currency
A: In an economy or in a country there are different economic and commercial transactions that lead to…
Q: What term is used to describe the process of reducing foreign exchange risk? Choose the correct.…
A:
Q: explain what economists attribute so much attention to Real Exchange Rates? Provide an answer that…
A: Exchange rates are the rates in which one currency could be exchanged into the currency of another…
Q: “Investors engage in forward exchange transactions to hedge against foreign currency risk. EXPLAIN…
A: A futures contract is a customized contract between two parties to buy or sell an asset at a price…
Q: What is meant by spot rate in case of foreign currency transaction?
A: Spot rate is the rate at which currencies can be exchanged right away. It is the current market…
Q: Explain using illustrations, how various forms of arbitrage can remove any discrepancies in pricing…
A: Arbitrage is the type of trade in which there is purchase and sale of asset in order to generate…
Q: What is the difference (description) between Money Market, Bond Market, Equity Market, Foreign…
A: Money market, bond market, equity market, foreign exchange market and derivatives market are…
Q: why a firm should consider hedging net payables and recivables with currency options rather than…
A: Hedging is the process by which risk can be reduced. Options are the derivative instruments that…
Q: Describe techniques for “hedging” againstlosses from fluctuations in exchange rates.
A: Hedging is the strategies used for reducing the risks and impacts of negative changes or…
Q: Explain how various forms of aribtrage can remove discrepancies in the pricing of currencies
A: Arbitrage is defined as the process of purchasing the security in one market and sells them in some…
Q: Show the different arguments put forward by the proponents and opponents of currency hedging?
A: Following reasons are given by opponents of hedging: Managers cannot outguess the market.…
Q: Define each of the following terms: d. Exchange rate risk; convertible currency; pegged exchange…
A: Introduction: The terms exchange rate, fixed exchange rate system, floating exchange rate are…
Q: Discuss the following types of currency risks giving suitable examples: i. Economic risk ii.…
A: EXPLANATION:- Currency Risk Currency ratio is a measurement of loosing money as a result of…
Q: Explain the following terms. a. ADR and GDR Depository Receipts b. Bid Rate and Ask rate c. Option…
A: Since you have asked multiple questions, we will solve the first question for you as per policy.…
Q: Explain in general terms how various forms of arbitrage can remove any discrepancies in the pricing…
A: "Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: How does the various forms of arbitrage remove discrepancies in the pricing of currencies?
A: Arbitrage is generally the common practice which is used by the investor in order to take advantage…
Explain this function of BSP
-Liquidity management
-determination of exchange rate policy
-lender of last resort
-Currency Issue
Step by step
Solved in 2 steps
- Define each following terms: p. American depository receipts (ADRs); repatriation of earnings q. Country risk; exchange rate risk; political risk; business climateWhich of the following is part of the payments system of the economy? A. currency B. demand deposits C. E-money D. all of the aboveWhat causes balance sheet (or translation) exposure to foreign exchange risk? How does balance sheet exposure compare with transaction exposure?
- Discuss the following types of currency risks giving suitable examples:i. Economic riskii. Translation risk iii. Transaction riskWrite Notes on the Following A: Off Balance Sheet Assets and Liabilities B: Interest Rate Risk Management C: Sterilized Intervention in Foreign Exchange D: Unsterilized Intervention in Foreign Exchange E: Balance of PaymentFor every debit, there is credit is stated in which concept? A. Money Measurement Concept B. Dual Aspect Concept Revaluation Reserve Market Value
- why a organisation should consider hedging net payables or net receivables with currency options rather than: forward contracts, and future contracts.A foreign currency loan is a typical example for O a. Currency Risk O b. Interest rate risk O c. Translation Exposure O d. Transaction ExposureExplain what a currency instrument is? Give examples of such currency instrument