• Research Paper on:
    The Role of Currency in Business

    Number of Pages: 10


    Summary of the research paper:

    This 10 page paper provides two proposals in respect to a case study submitted by a student. The role of currency in business is discussed along with future contracts and other related variables. Two charts are included. Bibliography lists 15 sources.

    Name of Research Paper File: RT13_SA152cur.rtf

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    Unformatted Sample Text from the Research Paper:
    has extensive trading relationships through exports and foreign owned subsidiaries. Involved are a variety of foreign currencies and payment systems and the present company policy for managing currency exposure is  to cover net foreign exchange positions with forward contracts. This way, one can invoice the payment in a deep convertible currency such as US dollars for example. At the same  time, recent behavior of forward rates of major foreign currencies, concerning firms that company has been doing business with, has led to losses in the currency transactions. This is true  when compared with the spot rate prevailing during the time of delivery. The company is presently debating the wisdom of current policy in  this regard and is seriously considering whether or not it should engage in foreign exchange rate forecasting at all, while leaving exposed positions open at times. A student writing  on this subject, creating two contrasting reports for the Board, will want to take approaches that are not necessarily juxtaposed, but certainly different. A student will want to weigh the  advantages of currency forecasting against not dabbling in such transactions. II. The Case For Conservative Policy  A student writing on this subject will want to show support for the existing policy of covering all currency exposures simply because it is difficult to forecast future spot exchange  rates. Also, the risk of the company leaving currency positions open is unacceptable. The company presently manages currency exposure by covering net foreign exchange positions with forward contracts and  this needs to change. The influence of certain institutional factors on futures-forward price differentials should be noted (Lakshman and Peace 1). Yet, the problem with futures contacts prove 

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