Corporate Foreign Exchange Risk Management

Cover -- Title Page -- Copyright -- Contents -- Acknowledgements -- About the Authors -- Preface -- Key Terms and Abbreviations -- Introduction -- Two Stylized Facts About Exchange Rates -- A Definition of FXRM -- Quoting Exchange Rates -- Outline of the Book -- Further Reading -- Chapter 1 Why Manage Foreign Exchange Risk? -- From Individual Risk Management to Corporate Risk Management -- The Case for FXRM: Cash Flow Hedging -- The Case for FXRM: Protecting Financial Ratios -- The Case for FXRM: Managing Net Income Variability -- Key Chapter Takeaways -- Further Reading -- Chapter 2 Commercial Exposure to FX -- The Basics of Transaction Exposure -- Forecasting Net Exposures -- A Simple Model of Commercial Exposure -- Competitive Exposures -- The Mystery of the 'Underlying' Currency -- Shortcomings of the Bottom‐up Method -- The Statistical Method of Exposure Measurement -- Key Chapter Takeaways -- Further Reading -- Chapter 3 Net Income Exposure to FX -- The Basics of Translation Exposure -- Monetary vs Non‐monetary Assets -- The Issue of Functional vs Transaction Currency -- The Exposure Matrix -- External Exposures on Internal Transactions -- Key Chapter Takeaways -- Further Reading -- Chapter 4 Balance Sheet Exposure to FX -- The Basics of Non‐monetary Assets and Liabilities -- Reconciling the Exposure Matrix with Shareholders' Equity -- Reconciling Internal Transactions with Shareholder's Equity -- Reconciling Translation of Income with Shareholder's Equity -- The Currency Translation Reserve: A Summary -- Key Chapter Takeaways -- Further Reading -- Chapter 5 FX Derivatives Explained -- The Basics of Forward Contracts -- Determining Forward Rates -- FX Futures Contracts -- Currency Swaps -- The Basics of FX Options -- Options from an FXRM Point of View -- Key Chapter Takeaways -- Further Reading -- Chapter 6 Hedge Accounting Explained.