--%>
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 : Capital budgeting analysis imperative

    State why is capital budgeting analysis so imperative for the firm?

    		•
  • Q : Define the term Accounts Payable

    Accounts Payable: It is an accounting entry which symbolizes an entity's obligation to pay off a short-term debt to its creditors. Accounts payable entry is found on balance sheet beneath the heading current liabilities. Accounts payable are frequentl

    		•
  • Q : Spiritual Health Spiritual Health : The

    Spiritual Health: The relations with their superiors and peers are good. They work for a cause for the society and therefore they are able to draw contentment. This at times work against health to create compassion stress when employees are not able t

    		•
  • Q : Link financial accounting and

    is there a link between financial accounting and programmed decision

    		•
  • Q : Advantages and disadvantages of FDI

    State advantages and disadvantages of FDI as opposed to the licensing agreement with the foreign partner?

    		•
  • Q : Creatives and Suites What happens when

    What happens when creativity based on individual exceptionalism has evolved as part of the orthodoxy of Western managerial practice is applied within a creative business organisation in the business of “symbolic production&rdquo

    		•
  • Q : Implications of fixed and flexible

    Explain “balance of payments” identity and discuss some of its implications under the fixed and flexible exchange rate regimes.

    		•
  • Q : Salary outstanding account What type of

    What type of Account is Salary outstanding? What do you think, it is real or personnel or the nominal account?

    		•
  • Q : Define Factitious Assets Factitious

    Factitious Assets: When any asset that has no market price which asset is termed as factitious assets. This is illustrated as expenditures of capital expenditure. The main illustration of such factitious assets is: Preliminary expenses, discount on is

    		•
  • Q : Account A structure for showing the

    A structure for showing the effect of market events on a particular asset, liability, equity, earnings, or expense. The effects are measured in terms of dollars. The account looks like as a collection point in the meanwhile the processing of all the transactions involving the balance sheet or inc

    		•