Money market hedge

Money market hedge

The use of borrowing and lending transactions in foreign currencies to lock in the home currency value of a foreign currency transaction.
References in periodicals archive ?
A money market hedge, that is not as extensively as the forward hedge, is an alternative technique for managing the foreign exchange risk of the short-term cash flow position of a firm, and it involves borrowing and investing in domestic and foreign short-term money markets based on thorough analysis of foreign exchange markets and domestic and foreign money markets.
According to Interest Rate Parity (IRP), for the international financial markets to be in equilibrium, the result of forward hedge of receivables or payables in foreign currency must be identical to that of the money market hedge.
multinational corporations has been affected by the implementation of money market hedge.
A money market hedge tries to eliminate foreign currency risk by trading the currency today on the spot market.
To perform a money market hedge USB will undertake three steps:
Summary of costs $ Forward contract 1,933,862 Money market hedge 1,940,586 Futures market 1,917,000 Option 1,935,500
A money market hedge involves simultaneous borrowing and lending activities in two different currencies to lock, in the home currency value of a future foreign currency cash flow.
Time to dust-off your currency risk management plans, if you haven't done so already, and conduct a keen review of those hedging instruments like your Forward Exchange Contracts, Money Market Hedge, Futures, Options and Swaps.
These techniques include forward market hedge, futures hedge, money market hedge, currency options, exposure netting and the use of official export/financing agencies.
Describe a money market hedge that could be used to eliminate the exchange rate risk associated with the Dec.
A money market hedge is generally an arrangement with the bank requiring St.
The money market hedge locks in a payment price at the time of the December 2005 order equal to $259,758.