Ow different size of firms using financial hedging techniques such as Forwards, Futures, Options and Swaps to manage currency risk
There are four different commonly used financial hedging techniques (Forwards, Futures, Options and Swaps) and some operational hedging techniques that firms use to manage currency risk.
The hedging techniques include swaps, futures, forwards, options and money market hedge. Please be more specific when evaluate each types of hedging techniques, for example swap which include single currency interest rate swap and cross-currency interest rate swap.
1) Introduction (200 words)
2) Drawing on literature, critically evaluate all relevant hedging techniques used by large firms or multinational companies. Illustrate your arguments with appropriate examples / cases / empirical studies review. (700 words)
3) Drawing on literature, critically evaluate all relevant hedging techniques used by small firms. Illustrate your arguments with appropriate examples / cases / empirical studies review. (700 words)
4) Compare the similarities and differences of the use of these hedging techniques by large and small firms. (600 words)
5)conclusion (200 words)
Maximum words limit 2500 in total.
The following learning outcomes are being assessed:
1. Compare the financial products available on international markets
2. Devise and apply appropriate strategies using derivatives to manage currency risk.
3. Critically evaluate the use of derivative instruments to manage currency risk.