Slide  8 of  32
Slides developed by Jeff Madura, with additions and enhancements by Tim Richardson
Chpt 10
Relevance of Exchange Rate Risk
uArguments supporting relevance
–hedging reduces volatility of MNC operations
–creditors may prefer that the firms to which they lend maintain low exposure to exchange rate risk
–creditors are usually the banks and they are serving their own interests since the things companies will do to reduce exchange rate risk will involve using the services of banks