The setting of budget rates is crucially important for a corporation as it can drive not only the corporation’s hedging but also its pricing strategy as well. Budget exchange rates can be set in several ways. The benchmark or budget rate for an investment in a foreign subsidiary should normally be[...]
Posts Tagged ‘Money’
July 1st, 2009 - 9:07 pm § in Currency Risk
HEDGING EMERGING MARKET CURRENCY RISK
Emerging market currencies have important characteristics which a corporation needs to take account of with specific regard to a currency hedging programme: Liquidity risk, Convertibility risk, Event risk, Jump risk. Discontinuous price action. Implied volatility is a very poor guide to future spot [...]