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What Is The Significance Of Foreign Exchange Rate Risk And How Can This Risk Be Mitigated? |
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Answer» Foreign EXCHANGE RISK is also known as hedging. Those people who are risk averse follow this kind of transaction to save firm from UNEXPECTED loses. Since exchange rate can change in either way i.e. it can depreciate or appreciate, company can gain at the same time but to mitigate loses they engage into FORWARD contracts. Foreign exchange risk is also known as hedging. Those people who are risk averse follow this kind of transaction to save firm from unexpected loses. Since exchange rate can change in either way i.e. it can depreciate or appreciate, company can gain at the same time but to mitigate loses they engage into forward contracts. |
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