TAILIEUCHUNG - Lecture Financial risks management - Topic 9: Competitive exposure and real currency appreciation, managing country risk

In this chapter students understand and can recall: why changes in real exchange rates matter, how to measure competitive exposure, how to manage competitive exposure, How to manage country risk, real exchange rate appreciation, competitive exposure and loss due to exchange rate changes. | Topic 9: cOMPETITIVE Exposure and real currency appreciatioN; Managing Country Risk L. Gattis Financial Risk Management 1 Question You are a California wine producer that exports most of your wine to Canada. What is the California wine producers exposure to the euro? Question Suppose the euro devalues 5% against the dollar because euro inflation is 5% higher than the Are California wine producers better or worse off? Learning Objectives Students understand and can recall why changes in real exchange rates matter how to measure competitive exposure how to manage competitive exposure How to manage country risk Students can calculate real exchange rate appreciation competitive exposure and loss due to exchange rate changes 4 Forex Exposure I. Translation “Accounting” Exposure arises when reporting and consolidating financial statements require conversion from foreign currency to home currency. It is a possible accounting gain/loss on foreign assets and liabilities which are reported as losses in income or adjustments to equity (Translation exposures often lead to cashflow losses when account are liquidated) II. Cashflow Exposures Transaction Exposure: potential gains or losses on foreign transactions such as bond payments and receivables paid in the foreign currency. (Up until a payment is made, these are only translation exposures) Competitive Exposure: long-term exposure to currency change on future business. 5 Transaction vs. Competitive Exposure Suppose your . based firm, produces widgets in Pennsylvania, which cost $100, and sells in Germany for €84 at an exchange rate of $ per euro. Profit: Short-term Transaction Risk (cannot change cost or prices in the short-term) What are profits if the euro depreciates 10%? Profit= A. $0 B. $ C. $ D. -$ E. -$ What was the USD appreciation? USD Appreciation= A. B. C. 6 Transaction vs. Competitive Exposure Long-term Competitive Risk depends on your ability to adjust prices .

• Tài chính doanh nghiệp
• Managing country risk
• Risk management
• Financial risks management
• Lecture Financial risks management
• Quản trị rủi ro
• Quản trị rủi ro tài chính
• Global finance
• Global financial management
• Lecture Global financial management
• Country risk
• Country risk analysis
• International financial management
• Financial management
• Managing transaction exposure
• Managing economic exposure
• International corporate governance
• International financial
• Direct foreign investment