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International Finance Organizations of Foreign Exchange Management - Research Paper Example

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This paper "International Finance Organizations of Foreign Exchange Management" outlines the hedging and other strategies required to be undertaken by financial managers of international organizations. The author gives information about the globalization of the financial markets, the risk of foreign exchange exposure, choice of instruments,  production and trade with the overall hedging positions…
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International Finance Organizations of Foreign Exchange Management
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Download file to see previous pages The management of foreign exchange is also more critical because of the increasing turmoil and volatility in the financial markets as the intensity of global competition is forcing many international organizations to hedge their foreign exchange exposures in a more prudent manner. Further, the rising volatility of the US dollar against major currencies especially Euro has forced many international organizations to guard their exposures in order to optimize the impact of volatility on their revenues as foreign exchange translation may significantly reduce their revenues.
The need to pay close attention to the foreign exchange exposure is also important because of the globalization of the financial markets as speed at which the transactions can be concluded require that the financial managers of the organizations must employ techniques and tools which help them to react to the other opportunities as well as threats in the international market.
Globalization has been considered as a revolutionary idea which is sweeping away the traditional boundaries of trade and inflicting serious socio-economic changes in many societies. This trend has carried forward to the financial markets and instruments also as the advancement in technology and the open access to capital and its relatively easier flow allowed many firms to engage into activities at much larger scale and with this broader integration of trade activities, financial transactions such as foreign exchange become global in nature too as the management of inflow and outflow of foreign exchange has resulted into more complications as organizations have to face different regulatory environments in each country, they operate or trade.
It has also been argued that the globalization of financial markets has made the volatility a regular feature of the financial markets and as such financial managers have to manage complex risks including counterparty risks, liquidity risks, delivery risk as well as rollover risks. (Levich, 1998). ...Download file to see next pagesRead More
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