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BU52006 Global Risk Analysis
ASSIGNMENT
Answer the following questions about hedging transaction exposure to foreign exchange risk:
(1) Name the four main contractual hedging techniques for managing transaction exposure.
(10)
(2) Explain how these techniques can be used to hedge the transaction exposure of a foreign
currency payable contract. (Word limit: 800 words ± 10%)
(40)
(3) Draw a diagram showing the possible outcomes of these hedging alternatives for a foreign
currency payable contract.
(20)
(4) Discuss the circumstances under which some of the contractual hedging techniques might be
preferred to the others. (Word limit: 400 words ± 10%)