Discussion
Many firms attempt to manage their foreign exchange exposure through hedging. Hedging requires a firm to take a position—an asset, a contract, or a derivative—the value of which will rise or fall in a manner that counters the fall or rise in the value of an existing position—the exposure. Hedging protects the owner of the existing asset from loss. However, it also eliminates any gain from an increase in the value of the asset hedged. The question remains: What will the firm gain from hedging?
Explain Hedging, its impact, and its pros and cons, giving a suitable example of your choice.
To earn full credit, post an initial response of 500 words that includes at least one APA citation and the associated reference
ASSIGNMENT
For this week’s assignment,
After Reading a MINI CASE BREXIT AND ROLLS ROYCE on pages no 370-374, Write an essay for about 5-7 pages and answer the following questions:-
1.Why do you think Rolls has continued to bear this structural currency mismatch for so long? Why hasn’t it done what many automobile companies have done and moved some of its manufacturing and assembly to the country in which the customer resides?
2.Why are Rolls-Royce’s foreign currency hedges performing so poorly? Shouldn’t the hedges be protecting its sales and earnings against exchange rate movements?
3.If you were a member of the leadership team at Rolls-Royce, what would you recommend the company do to manage the risks arising from Brexit?
Your paper must have at least 6 peer-reviewed references and be properly APA formatted. You must cite/reference all sources!
