Managing foreign exchange: looking forward
Article Abstract:
There are several methods available for protecting a particular exchange rate and hedging transactions. Forward contracting is an agreement to sell currency at a particular value at some time in the future. It has the advantage of being a simple off-balance sheet transaction. An option date forward contract is a forward contract that is agreed to be settled between certain dates. Another method involves using the money markets as an alternative to forward contracts by borrowing and depositing. Currency swapping involves trading for an asset in one currency from a liability in another. Currency options are the non-obligatory right to transact a specified amount of currency at an assigned exchange rate during a preset period of time.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1988
User Contributions:
Comment about this article or add new information about this topic:
Managing foreign exchange: borderline cases
Article Abstract:
Techniques for centralizing foreign currency management and increasing efficiency include netting, re-invoicing and factoring. Netting involves the use of central holding accounts to net inflows and outflows in the same currency and reduce the number of foreign exchange transactions. Netting improves inter-company settlement procedures and increases the treasurer's control over cash flows and foreign exchange exposures. Re-invoicing involves paying exporters and importers in their respective currencies through a central re-invoicing center. Factoring involves centralizing foreign exchange risk by using currency receivables which are factored with the treasurer.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1988
User Contributions:
Comment about this article or add new information about this topic: