International Financial Management: An Analytical Framework

CHAPTER 5

Management of Foreign Exchange Exposure and Risk

CHAPTER OBJECTIVES

After studying this chapter, you should be able to:

1. Discuss the concepts of foreign exchange exposure and foreign exchange risk, and understand how they are measured.
2. Define real exchange rate and nominal exchange rate from the perspective of foreign exchange exposure.
3. Classify foreign exchange exposure into economic and translation exposures, and understand how economic exposure can be further categorized into various types of transaction and operating exposures.
4. Discuss the management of transaction exposure and highlight various hedging techniques.
5. Describe the management of operating exposure.
6. Gain an overview of different currency translation methods.

Introduction ...