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International Financial Management by Thummuluri Siddaiah

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Chapter 5

Management of Foreign Exchange Exposure and Risk

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

  • Discuss the concepts of foreign exchange exposure and foreign exchange risk, and understand how they are measured.

  • Define real exchange rate and nominal exchange rate.

  • Classify foreign exchange exposure into economic and translation exposure, and understand how economic exposure can be further categorized into various types of transaction and operating exposures.

  • Discuss the management of transaction exposure and highlight various hedging techniques.

  • Describe the management of operating exposure.

  • Gain an overview of different currency translation methods.

5.1 Introduction

Foreign exchange rates never remain ...

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