Exchange Rate Risks Essay.
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Details:Write an essay in which you compare and contrast traditional
and modern society. what are the most important distinctions between
them? on balance, are you more sympathetic to traditional or
modernity? please use these 4 sources and only : 1)experts from
honour,family and patronage: a study of institutions and moral values
in a Greek mountain community\” by john k campbell, new edition oxford
university press. published 1999 pages 185-195, 202-205, 270-271,
274-279, 284-289, 302-303, 313-314. 2)The moral economy of the English
crowd in the eighteenth century, from the \”making of the english
working class, penguin books, by E.P Thmopson published on 1991 pages
185-189, 193-195, 197-203, 206-225, 230-231, 233, 253-258. 3) \”the
theory of mass society\” from \”the constitution of society\” by
Edward Shils, university of Chicago press, published one 1982, pages
69-89. 4)\”experts from the cultural contradictions of capitalism\” by
Daniel Bell, published on 1996, pages 37-38, 66-71. Please tell me
what quotation did u use and what page because i need to rework it.
and please give me a creative title.
Here’s a snippet of the essay.
Currency risk, or exchange rate risk, revolves around the relative value of currencies that reduce investment value denominated in foreign currency. Investors dealing with investments in foreign currency denominations stand the risk of receiving less in domestic currency. This is as a result of the payment of interest and principal that are in a foreign currency that has to be sold in order to purchase their home currency. The foreign currency may be devalued as compared to their home currency hence they receive less money than they expected. Foreign currency investments must hence be avoided if possible but at times this is not the case. Organizations have therefore come up with ways to curb or reduce this risk. Also known as currency risk hedging strategies, these methods eliminate or reduce this risk requiring an understanding of how the exchange rate risk could affect the operations of economic agents and ways of dealing with the consequent risk implications (Barton, Shenkir, and Walker, 2002).
Exchange rate risk refers to the effect of unexpected changes in the rate of foreign exchange to the value of a business. It may also be defined as the indirect or direct loss in a company’s assets and liabilities, cash flows, net profit, and consequently stock market value due to changes in the rate of foreign exchange. Exchange rate risk is a critical aspect of business operation, thus, multinational companies need to determine specific types of current risk exposure, and the appropriate hedging strategies to manage the risk (Bergin, 2003).
Types of Exchange Rate Risks
There various types of exchange rate risks, including; transaction risk, , economical risk and translation risk.
Transaction risk is basically cash flow risk. It refers to the effects of changes in the exchange rates on the transactional account exposure linked to payables, receivables, and repatriation of dividends. In this case, the risk prevails when a company commits cash flow to be paid on foreign currency. For instance if a company sells products whose payment comes after a delayed period, may be 90 days, then its is likely to experience transaction risk in case the foreign currency may fluctuate resulting to a loss (Habibnia, 2013).
Translation risk refers to the exchange rate risk in the balance sheet, and relates to the changes in the valuation of foreign subsidiary, thus the consolidation of the foreign subsidiary to the balance sheet at the mother company. When a company has investments oversees, it has to translate the values of the foreign currency to home currency, and before publishing the consolidated financial accounts, it has to consolidate the foreign values with home current assets and liabilities. This translation at times results in unfavorable equivalent currency values of both assets and liabilities, (Papaioannou, 2006) thus the translational risk.