- Using the most recent three years relevant information from the chosen companies, list and discuss two different foreign currency hedging methods that employed by the chosen companies to manage their foreign currency transaction exposures.
- List and describe hedging method (B) employed. (SWAP METHOD) 600 words
Describing about the swap method usage in 3yrs info about the Qantas Airways Limited & Virgin Australia Holding ltd…………….. Benefit of swaps method and disadvantage
–Swaps is a derivative product in which two counterparties exchange certain benefits of one party’s financial asset for those of the other part’s assets.
- Foreign currency swaps
A FX swaps in a simultaneous sale and purchase transaction that has two settlement dates:
The “start date” when a currency is first exchanged for another at an agreed exchange rate (agreed rate/ swap rate)
The “end date” when the currencies are exchanged back at an agreed exchange rate. (close the deal)
Eg: Transaction is different and set by the market and will generally reflect the current interest rates of the two countries involved for the term of the FX swap.
(Benefit disadvantage, Risks)
- Cross currency swaps
- Currency swaps
- Current interest rate swaps: Is an agreement to exchange periodic payments related to interest payments on a same currency which can be fixed against floating. There are other variations such as 3month floating against 6months floating.
- Using the relevant literature reviews from the past ten years, critically evaluate each hedging method identified in (1) and relate to appropriate examples from the chosen companies to support your arguments. (300words)
- Critical evaluation of hedging method (B). (SWAP METHOD) need to include 3 or 4 research articles
