Your SlideShare is downloading. ×
Currency Risk May 28 2010
Currency Risk May 28 2010
Currency Risk May 28 2010
Currency Risk May 28 2010
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Currency Risk May 28 2010

300

Published on

This panel presentation will bring together experts in international business from the law and banking fields to discuss a variety of payment and banking issues that arise in international …

This panel presentation will bring together experts in international business from the law and banking fields to discuss a variety of payment and banking issues that arise in international transactions. The ultimate reward for successfully penetrating foreign markets is to earn a profit from your sales. However, getting paid often proves to be one of the greatest challenges when selling your products abroad. This panel will explain how to protect yourself when entering into international transactions. The risk from the fluctuation of currency values will also be discussed – as well as other banking matters that businesses face when venturing into foreign transactions.

Published in: Economy & Finance, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
300
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
0
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. International Banking and Payment Systems How to Move Money, Get Paid, and Manage Currency Risk in the Global Marketplace Matthew Kuchta Fifth Third Bank Melissa Sullivan Fifth Third Bank Mark Sundahl Cleveland State University Yormick & Associates
  • 2.
    • Why Hedge Foreign Exchange Risk?
    Risk Management FX Hedge Contracts Predictable Currency Rates
    • Lock in margins – vs budget, goals or previous periods
    • Meet earnings / profitability expectations
    • Increase financial flexibility
    • Focus on core business
    • Develop growth and sales strategy given known costs
  • 3. Overview of Conventional FX Hedging Tools Instrument: Forward Outright Time Options FX Options (Puts & Calls) Description Customer locks into a fixed rate of exchange for a set amount of foreign currency at a pre-determined value date Hybrid of the forward outright, it allows for a value date range as opposed to one specific value date Option buyer owns the right but not the obligation to sell or buy currency at a fixed strike price in the future Advantages
    • Full protection from adverse currency fluctuation
    • Known pricing
    • Ability to budget, meet goals
    • Convenience of settling on any date within the maturity window while avoiding the trouble of rolling the contract
    • Full protection from adverse currency fluctuation
    • Full downside participation
    • Minimum credit issues
    • Appropriate for contingent FX risk
    Disadvantages Loss of any participation in advantageous currency fluctuation Slightly more expensive than the forward outright Upfront premiums
  • 4. Overview of Structured FX Hedging Tools Instrument Collar (Zero-Cost) Participating Forward (2 to 1) Assumption Customer is short foreign currency Customer is short foreign currency Description Creates a protective hedge rate range Customer buys a call and sells a put with strike structures so that there is no premium outlay required Creates a protective hedge rate range Customer buys a call and sells a put for half the amount with strikes structured so that there is no premium outlay required Advantages
    • Can be set for zero cost
    • Protects against adverse rate movements (Protective strike)
    • Provides opportunity to participate in advantageous market movement up to opportunity strike
    • Can be set for zero cost
    • 100% protection against adverse rate movements
    • Significant opportunity to participate in improving market (50% up to opportunity strike and 50% unlimited beyond that)
    Disadvantages Customer loses participation in advantageous market movement beyond the call strike Customer loses participation in advantageous market movement beyond call strike (but only on half of the hedged position)

×