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Companies which are involved in the international business are exposed to more risks in comparison to the firms that operate within a particular country. Exchange
Companies which are involved in the international business are exposed to more risks in comparison to the firms that operate within a particular country. Exchange rate is one among the main risks that could affect the profitability of a global company. It is a common practice for many companies to actively manage the exchange rate risk lerivatives such as forward contracts, options, futures and swaps. Required: a. Examine the different types of derivatives used in managing exchange rate risk. b. Explain which type of derivative you would recommend to a small-scale company that exports once in a few months and to a large-scale company that is involved in regular export of large consignments every few weeks. c. Evaluate if swap is the only possible arrangement in cross-border borrowing
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