--%>
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 : Variants of basic interest rate and

    Discuss briefly some of the variants of the basic interest rate and currency swaps.

    		•
  • Q : Factors considering before investing

    Being an investor, what are all factors you would consider before investing within the emerging stock market of developing country?

    		•
  • Q : Retail Invoice versus Tax Invoice

    Explain the difference between Retail Invoice vs. Tax Invoice?

    		•
  • Q : Asset-allocation funds Mutual funds

    Mutual funds that hold both bonds and stocks. Some asset-allocation funds follow specified allocation percentages and others take advantage of current condition. Those that take advantage of current condition is higher risk, because the fund manager tries to adjust the allocations to take advanta

    		•
  • Q : Essay topics related to Religion I have

    I have some problem related to Essay topics which are related to Religion which are illustrated below: Topic A:What are the qualities of the ‘perfect&rsq

    		•
  • Q : Vernon’s product life-cycle theory of

    Discuss the Vernon’s product life-cycle theory of the FDI. Specify the strength and weakness of theory?

    		•
  • Q : Maintaining the fixed exchange rate

    Explain why “Once  the capital markets are integrated, it becomes difficult for the country in order to maintain the fixed exchange rate”. 

    		•
  • Q : Analysis of cash flow statement What do

    What do you mean by the term Analysis of cash flow statement?

    		•
  • Q : Define Revenue Revenue : The amount

    Revenue: The amount (sum) of money which a company really receives throughout a specific period, comprising discounts and deductions for the returned merchandise. This is the "top line" or "annual income" figure from which costs are subtracted to find

    		•
  • Q : CASH AND ACCRUAL BASIS OF ACCOUNTING

    Using the data below,prepare abbreviated income statements for the year 2003 and 2004 on cash basis. Cash receipts from sales: 2003 2004 2005 on 2003 sales $295,000 $160,000 $30,000 On 2004 sales 0 355,000 90,000 On 2005

    		•