Lesson Overview:
In this lesson, we'll explore the critical context of FX (foreign exchange) risk in international business. We'll discuss why large multinational corporations frequently hedge against FX risk, while smaller businesses are less likely to do so. The lesson will address common misconceptions such as "FX is not my business" and emphasize why managing FX risk is essential for any company involved in cross-border transactions.
Duration: 4:02 min.
Lesson Overview:
This lesson delves into the decision-making process behind whether a company should hedge its FX risk. We'll discuss why hedging is not just a choice but a necessity for many businesses. The lesson will cover the fundamental principles of hedging and emphasize the inherent unpredictability of FX rates, highlighting why relying on market predictions is risky.
Duration 5:42
Lesson Overview:
This lesson will focus on internal strategies companies can use to minimize their FX risk without resorting to financial derivatives. We'll explore various methods such as choosing the right currency accounts, matching currency inflows and outflows, and other internal techniques that can effectively mitigate FX exposure.
Duration 4:03 mins
Lesson Overview:
In this lesson, we will explore the historical development of FX risk management, focusing on the evolution of financial derivatives and how treasury functions have transformed over time.
Duration 2:15 mins
Lesson Overview:
This lesson will examine the roles and responsibilities of finance and treasury functions within contemporary organizations. We’ll discuss how these departments collaborate to manage financial risks, including FX risk, and ensure the company’s financial health.
Duration 5:06 mins
Lesson Overview:
This lesson will explore the critical components that form the foundation of a robust risk management framework. We’ll discuss the importance of defining risk appetite, developing a coherent risk management strategy, and implementing effective processes to monitor and manage risk across the organisation.
Duration 3:28 mins
Lesson Overview:
This lesson will analyze real-world examples of how leading multinational companies manage their FX risks. We’ll explore the strategies and tools used by companies like Airbus and others, providing insights into the practical application of FX risk management principles in complex, global environments.
Duration 6:27 mins
Lesson Overview:
This lesson will focus on the importance of hedging forecasted cash flows and the reasons why companies undertake this practice. We’ll discuss how future cash flows, particularly those in foreign currencies, can be exposed to FX risk, and why proactive hedging is essential to protect against unfavourable currency movements.
Duration 4:01 mins
Lesson Overview:
This lesson will examine the concept of micro hedging, which involves hedging specific, individual exposures, and discuss why it may not always be the most effective approach for managing FX risk. We'll explore the limitations of micro hedging and consider alternative strategies that may offer more comprehensive risk management solutions.
Duration 4:32 mins
Lesson Overview:
This lesson will present a detailed case study of a client utilizing Corphedge to manage their forecasted cash flows. We will explore how Corphedge's tools and strategies are applied to hedge future cash flows effectively, providing practical insights into the implementation and benefits of using advanced hedging solutions.
Duration 7:13 mins
Lesson Overview:
This lesson focuses on managing income variability, which refers to fluctuations in revenue and profitability due to various factors, including market conditions, operational changes, and FX rate movements.
Duration 6:19 mins
Lesson Overview:
This lesson will introduce the Sharpe Ratio, a key metric used to evaluate the risk-adjusted return of an investment. We will explore what the Sharpe Ratio measures, how it is calculated, and how effective FX risk management can enhance a company’s Sharpe Ratio by improving the balance between risk and return.
Duration 3:06 mins
Lesson Overview:
This lesson focuses on the comprehensive management of FX exposures, including what aspects to manage, the goals and benchmarks for effective FX risk management, and the benefits of a centralised approach to exposure management.
Duration 6:07 mins
Lesson Overview:
This lesson will cover passive hedging techniques and how to evaluate their effectiveness by stress testing these strategies using historical data. We will use the Corphedge platform to demonstrate how passive hedging methods can be applied and analysed to manage FX risk.
Duration 8:28 mins
Lesson Overview:
This lesson will explore the various hedging strategies available to importers and exporters, focusing on the advantages and disadvantages of each approach.
Duration 16:19 mins
Lesson Overview:
This lesson will focus on transaction exposure, which arises from the risk of currency fluctuations affecting the value of contractual cash flows, such as payments and receipts from international transactions. We will explore various strategies and techniques for managing transaction exposure to stabilise financial outcomes.
Duration 7:12 mins
Lesson Overview:
In this lesson, we will analyze a real-world case study of a European company importing fruits from Latin America, where transactions are conducted in USD while the company’s functional currency is EUR. We will explore the FX risk management strategies employed to handle this situation effectively and the outcomes of these strategies.
Duration 6:16 mins
Lesson Overview:
This lesson will explore the Value at Risk (VaR) approach for quantifying and managing FX risk. VaR is a statistical technique used to measure the potential loss in value of a portfolio over a specified time period for a given confidence interval. We will cover how to use VaR to assess FX risk and apply it effectively in risk management.
Duration 5:26 mins
Lesson Overview:
This lesson will explore how a NYSE-listed company utilizes the Value at Risk (VaR) approach to manage its FX risk. We will review a real-world example to illustrate how VaR is implemented, the outcomes achieved, and the lessons learned from the company’s experience.
Duration 3:30 mins
Lesson Overview:
This lesson will delve into economic exposure, also known as operating exposure, which reflects how changes in exchange rates can impact a company’s future cash flows, competitive position, and overall financial performance.
Duration 6:17 mins
Lesson Overview:
This lesson focuses on translation exposure, which arises from the need to convert financial statements from foreign currencies into a reporting currency. We will explore how FX fluctuations affect monetary and non-monetary assets and liabilities and discuss strategies for managing translation exposure.
Duration 5:10 mins
Lesson Overview:
In this lesson, we will examine a NYSE-listed company's financial statement to understand how foreign exchange (FX) fluctuations impact their reported financial statement.
Duration 1:23 mins
Lesson Overview:
This lesson covers balance sheet hedging, a strategy used to manage translation exposure by aligning the currency of a company’s assets and liabilities. We will discuss how balance sheet hedging works, provide an example, and explore methods to forecast how much to hedge.
Duration 4:05 mins
Lesson Overview:
This lesson will cover how to measure and determine the optimal amount to hedge in a balance sheet hedging program. We will explore methodologies for assessing exposure and hedge size.
Duration 1:05 mins
Lesson Overview:
This lesson explores the fundamental factors that influence exchange rates and drive currency markets. Understanding these drivers helps in predicting currency movements and making informed decisions about currency risk management and hedging strategies.
Duration 7:12 mins
Lesson Overview:
This lesson will delve into why the US dollar (USD) is considered the dominant global currency and enjoys what is often referred to as "exorbitant privilege." We will explore the factors that contribute to this dominance and the implications for global finance and economics.
Duration 7:39 mins
Lesson Overview:
This lesson focuses on passive hedging strategies used to manage foreign exchange (FX) risk with minimal active intervention. We will cover three common passive hedging techniques: layering hedge, rolling hedge, and static hedge. Each strategy has its own approach to managing FX exposure and its own benefits and limitations.
Duration 4:05 mins
Lesson Overview:
This lesson will cover how to stress test passive hedging strategies using historical data, specifically utilizing the Corphedge platform. Stress testing helps evaluate the effectiveness of various hedging strategies under different historical scenarios.
Duration 8:28 mins
Lesson Overview:
This lesson focuses on hedging committed cash flows using back-to-back hedging techniques. These strategies are employed to manage FX risk associated with predictable and fixed cash flows, ensuring that both the company’s assets and liabilities are effectively hedged against currency fluctuations
Duration 12:09 mins
Lesson Overview:
This lesson explores various options strategies used to hedge or speculate on foreign exchange (FX) risks. We will discuss the most popular option strategies, their mechanics, and how they can be applied in different market scenarios.
Duration 5:23 mins
Lesson Overview:
This lesson focuses on comparing FX options and forward contracts as hedging instruments, discussing scenarios where one may be preferred over the other. We will also explore how to stress test these strategies using historical data with the Corphedge platform to assess their performance under different market conditions.
Duration 8:54 mins
Lesson Overview:
This lesson explores the concept of a centralised view on foreign exchange (FX) exposure, emphasizing its importance for effective risk management. We will discuss how centralising FX exposure data enhances decision-making, improves risk management, and supports strategic financial planning.
Duration 6:46 mins
Lesson Overview:
This lesson explores netting and natural hedging strategies for managing foreign exchange (FX) risk. We will discuss the mechanics of each strategy, their benefits, and their applications in reducing currency risk.
Duration 2:58 mins
Lesson Overview:
This lesson focuses on forecasting FX exposures and strategies for hedging forecasted cash flows. We will explore how to effectively use forecasting tools and methods to anticipate future FX risks and how the Corphedge platform can assist in implementing effective hedging strategies for these forecasted exposures.
Duration 11:38 mins
Lesson Overview:
This lesson focuses on hedging strategies for managing foreign exchange (FX) risk associated with loans. We will examine why understanding the costs associated with hedging is crucial and how to evaluate whether it is worthwhile to hedge. A real case study and accompanying spreadsheet will be provided to illustrate the process of analyzing hedging decisions.
Duration 5:54 mins
Lesson Overview:
This lesson will explore how companies hedge committed cash flows using back-to-back strategies. We will use a real case study to demonstrate the implementation of these strategies and illustrate how the Corphedge platform can support effective hedging of FX commitments.
Duration 5:15 mins