foreign exchange rate:

translation risk: consolidated financial statement,

transaction: received less or paid more

economic risk: asset value decreased by the impact of exchange rate change.

applying:

single transaction

investment project appraisal

hedging: fixing the exchange rate for the future transactions

derivatives  & underlying asset

fowward

future

swaps

option

moving against 

moving in your favour

• synthetic 
• netting map

transaction risk: uncertainty of the exchange rate in future due date

solutions: hedging

economic risk :  longterm movement uncertainty of the value of the business-  solutions: be diversified,  netting map

translation: gain or loss on translation in the financial reporting    solution  fund asset with the local fund 

internal technologies:

1. all transaction under home currency

2. leading    moving against you  pay or receive early     

3. lagging    moving in your favour   pay or receive later

4. matching off: same foreign currency received and paid

money market hedge (MMH) commercial loan and bank deposit  to offset the future payment and receivable  

pay: take home currency loan, exchange in spot rate and deposit in foreign currency to meet future payment, on due, pay off the loan 

receive: take foreign loan and and covert at spot rate, on due date, use the receivable to payoff the loan.

take into account of the interest

interest rate parity:

rf--- foreign currency interest rate

rh---base currency interest rate