The document is a communication from JMSD Corporation to ABC Corporation discussing the advantages of hedging against currency fluctuations that impact the value of securities and commodities for exporters and importers. It outlines the differences between cash flow and fair value hedges, and emphasizes how hedging can mitigate financial risks associated with variable rate items and significant currency fluctuations. The letter invites the client to further discuss hedging and derivative strategies to manage potential financial risks.

1. JMSD Corporation
202, Quirino Higway, corner Regalado Avenue,
Fairview, Quezon City, 1118
8875-2341 | youremail@yourcompany.com
July 2, 2021
The Client
ABC Corporation
XYZ Street, Tondo Manila
Dear Client;
We are honored to discuss with you the advantage of hedging in regards to
fluctuations in the currency that can significantly affect the value of security
and commodities, that The Client, an exporter, and importer will supply and
purchase.
With a cash flow hedge, you're hedging the changes in cash inflow and
outflow from assets and liabilities, whereas fair value hedges help to
mitigate your exposure to changes in the value of assets or liabilities. So,
while fair value hedges are best suited to fixed-rate items, the benefits of
cash flow hedges make them ideal for variable rate items.
The purpose of hedging through forward contract, future contract, swap, or
option is to hedge which is avoiding or managing financial risks. The client
through hedging can designate one or more hedging instruments, financial
instruments, to offset potential changes in fair value or cash flow of hedged

2. items.
Hedging is beneficial to mitigate the risk of significant fluctuations of
currency as it limits losses to a great extent since it gives protection against
commodity price changes, inflation, currency exchange rate changes,
interest rate changes, etc. It enables traders to survive hard market
periods. And, it can be used for locking profit. Although you are foregoing
the potential gains over the security over potential losses as if you are
playing safe.
Please call me at your earliest convenience to discuss the matter and to
explore hedging and derivatives.
I look forward to speaking with you soon.
Sincerely,
Jhoana Marielle Duco
JMSD Corporation