Topic 4. Currency risk management

Companies that are not involved in operations in foreign currencies could be subjected to:

• operational exchange rate risk

• translation exchange rate risk

• economic exchange rate risk

• are not subjected to exchange rate risk

Companies that make portfolio investment abroad are subjected to:

• operational exchange rate risk

• translation exchange rate risk

• economic exchange rate risk

• are not subjected to exchange rate risk

Currency risk acceptance is the strategy suitable for:

• operational exchange rate risk

• translation exchange rate risk

• economic exchange rate risk

• any type of currency risk

Matching is the effective strategy for:

• operational exchange rate risk

• translation exchange rate risk

• economic exchange rate risk

• operational or translation exchange rate risk

Risk sharing is the possible strategy to manage:

• operational exchange rate risk

• translation exchange rate risk

• economic exchange rate risk

• operational or translation exchange rate risk

Methods of balance translation refer to the case when MNC owns...

• less than 10% of shares of foreign company

• 10 to 50 % of shares of foreign company

• more than 50% of shares of foreign company

• any share in the foreign company

Matching strategy to manage translation exposure is efficient only in case of using

• Initial & current value method of balance sheet translation

• Monetary/Non-monetary method of balance sheet translation

• Current exchange rate method of balance sheet translation

• Is never used to manage translation exposure

Using forward contracts may be efficient in case of using

• Initial & current value method of balance sheet translation

• Monetary/Non-monetary method of balance sheet translation

• Current exchange rate method of balance sheet translation

• Any method of balance sheet translation