Transcription of CHAPTER VI CURRENCY RISK MANAGEMENT: FUTURES …
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CHAPTER VI CURRENCY RISK management : FUTURES AND FORWARDS In an international context, a very important area of risk management is CURRENCY risk. This risk represents the possibility that a domestic investor's holding of foreign CURRENCY will change in purchasing power when converted back to the home CURRENCY . CURRENCY risk also arises when a firm has assets or liabilities expressed in a foreign CURRENCY . Consider the following example. Example : Spec s, the Texas liquor store chain, regularly imports wine from Europe. Suppose Spec s has to pay for those imports EUR 5,000,000 on March 2.
Siam City Cement, Thailand's second largest cement producer, lost THB 5,870 million (USD 146 million), giving a net deficit for the nine-month period of 1997 of THB 5,380 million. Siam City Cement reported a net profit of THB 817 million during the first nine months of 1996. Industry analysts said that the company was affected by
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