CIVE 206 - Transaction exposure is the FX exposure
Question # 00575021
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Updated on: 08/17/2017 11:01 AM Due on: 08/17/2017
Transaction exposure is the FX exposure that you face on your operating working capital (accounts receivable, accounts payable etc.). Operating exposure is the FX exposure that you face on your long term assets. Which one of these exposures needs to be managed more actively (frequently)? Which tools can you use to manage transaction exposure? In your opinion, managing which of these two exposures is more risky? Why?
We talked about the PPP and IFE parities in the previous lectures. If these parities would perfectly hold in the market (in other words,your real purchasing power would stay constant), would there be a need to manage FX exposure? Why?
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Solution: CIVE 206 - Transaction exposure is the FX exposure