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Some companies refrain from using financial derivatives to manage their foreign exchange exposures. They consider derivatives such...

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Finance

Some companies refrain from using financial derivativesto manage their foreign exchange exposures. They considerderivatives such as forwards, futures and options as speculative.They also believe the long-term effect is the same regardless ofwhether a firm hedges since hedging results in gains sometimes andlosses other times.

  • Do you agree with these companies? Why or whynot?
  • If you are faced with currency exposures in yourbusiness, will you hedge? If so, how will you hedge?

Answer & Explanation Solved by verified expert
3.6 Ratings (689 Votes)
aI dont agree with the decision of the above companiesWhy becauseCoupled with the globalisation of the business raising international capital has assumed significant proportion during recent yearsThe volume of finance raised from international capital market is steadily increasing over period of yearsacross national boundariesSoto stabilize the cash flows and    See Answer
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Transcribed Image Text

Some companies refrain from using financial derivativesto manage their foreign exchange exposures. They considerderivatives such as forwards, futures and options as speculative.They also believe the long-term effect is the same regardless ofwhether a firm hedges since hedging results in gains sometimes andlosses other times.Do you agree with these companies? Why or whynot?If you are faced with currency exposures in yourbusiness, will you hedge? If so, how will you hedge?

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