IDEAS home Printed from https://ideas.repec.org/h/pal/palchp/978-1-137-31888-6_6.html
   My bibliography  Save this book chapter

Foreign Exchange Risk and Its Management

In: Exchange Rates and International Financial Economics

Author

Listed:
  • John N. Kallianiotis

    (University of Scranton)

Abstract

Foreign exchange risk is also known as exchange rate risk or currency risk or foreign exchange exposure, and it is the financial risk posed by an exposure to unanticipated changes in the exchange rates. Investors and MNCs exporting or importing goods and services or making foreign investments throughout the global economy are faced with an exchange rate risk, which can have severe financial consequences on firms’ profitability, cash flows, and their market value, if not managed appropriately. Currency-related gains or losses can have enormous impacts on reported earnings, which affect the firm’s profitability and consequently, the market’s opinion about this firm and its market value, through the demand of its financial assets. MNCs use a number of external techniques of risk (exposure) management and resort to contractual relationships outside their companies in order to reduce (or redistribute) the risk of foreign exchange losses. These hedging techniques are: forward exchange contracts, short-term borrowing, financial futures contracts, currency options, discounting bills receivable, factoring receivables, currency overdrafts, currency swaps, government exchange risk guarantees, and others, which are covered in detail in this chapter.

Suggested Citation

  • John N. Kallianiotis, 2013. "Foreign Exchange Risk and Its Management," Palgrave Macmillan Books, in: Exchange Rates and International Financial Economics, chapter 6, pages 221-252, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-31888-6_6
    DOI: 10.1057/9781137318886_6
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:palchp:978-1-137-31888-6_6. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.