The Costs of Altering Exposure to Exchange Risk

Robert Z. Aliber

Chapter 8. in Exchange Risk and Corporate International Finance, 1978, pp 94-101 from Palgrave Macmillan

Abstract: Abstract Risk neutralisation involves structuring the currency mix of the firm’s assets and liabilities so that changes in exchange rates will have minimal impacts on its income, net worth, and market value.1 The firm with a long position in the pengo can reduce its exposure by acquiring additional pengo liabilities; the firm might borrow pengos and use the loan proceeds to buy dollars or it might sell the pengo forward.2 As a first step, the firm should estimate the impact of anticipated changes in exchange rates on its income and market value with the current mix of assets and liabilities denominated in various currencies, and then with alternative mixes of assets and liabilities denominated in these currencies. 3 This chapter describes the techniques that can be used to alter the firm’s exposure to exchange risk and the costs or returns associated with such changes.4

Keywords: Exchange Rate; Interest Rate; Central Bank; Exchange Risk; Political Risk (search for similar items in EconPapers)
Date: 1978
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-03362-1_8

Ordering information: This item can be ordered from
http://www.palgrave.com/9781349033621

DOI: 10.1007/978-1-349-03362-1_8

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().