1.Why is an exporter that is to be paid in six months in a foreign currency worried about fluctuating foreign exchange rates?
2.Are there ways in which this exporter can protect itself? If so, what are they?
3.How does the credit or money market hedge work?buy protection on the credit names through credit default swaps. Money markets do not have price risk to them as they are very short dated instruments. They have re-investment risk to them which i am not sure that you are refering to. Credt default swaps are over the counter instruments and are not available to retail investors though. You can buy treasuries or be overweight treasuries if you believe that credit market would preform not that great
4.Why is acceleration or delay of payments more useful to an IC than to smaller, separate companies?IC... integrated chips? Making payments? Organizing into companies?
5.How would you accomplish exposure netting with currencies to two countries that tend to go up and down together in value?
6.Why is the price adjustment device more useful to an IC than to smaller, separate companies?Price adjustment devices are in and of themselves expensive, the potential theoretical gain (defined as sigma-t) versus the actual theoretical costs (defined as sigma-c) will always be higher for IC than to smaller companies. the larger the theoretical gain (sigma-t), the closer it gets to the limit value of of the dervitave of the price adjustment L(lambda)amount of price adjustment / sigma-c * sigma-tsmaller companies have lower derivative sales, and lower L(lambda) values, hence their price adjustment L(lambda)amount of price adjustment / sigma-c * sigma-t will always be lower
7.Some argue that translation gains or losses are not important so long as they have not been realized and are only accounting entries. What is the other side of that argument?
8.Is the parallel loan a sort of swap? How does it work?
9.How and why would a seller make a sale to a buyer that has no money the seller can use?
10.Developed country partners in countertrade contracts have had problems with quality and timely delivery of goods from the developing country partners. How are they trying to deal with those problems?
inb-help - Ms. Sue, Thursday, September 13, 2007 at 8:16pm
1. If an exporter agrees to sell his products today in the EU when one Euro equals $1.39 in U.S. dollars, he's concerned that six months from now, the Euro might rise and only be worth, say, $1.35 in U.S. dollars. Four cents isn't much -- until you multiply it by thousands.
2. The exporter could set a fixed amount of dollars the buyer will pay him. That way he'll get the money he expects even though the dollar may be worth less in Euros in six months.
OK. I answered your first two questions. Now it's your turn. We'll be glad to critique your answers if you post them here.
inb-help - BOBBY, Thursday, September 13, 2007 at 9:25pm
could you just give me some web sites please