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Essay / Research Paper Abstract
This 9 page paper examines the way that both Intel and AMD use hedging to reduce their exposure to exchange rate risks. The paper outlines the way both companies undertake hedging and their goals and then assessing which has the most beneficial approach. The bibliography cites 4 sources.
Page Count:
9 pages (~225 words per page)
File: TS14_TEintamd.rtf
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Unformatted sample text from the term paper:
the risk exposures are even greater. However, with the risks there is also an increased potential for reward, such as increased sales and spread of market risk. However, the risk
of exchange rates is one that is present even when product markets are stable and can transform a loss into a profit and a profit into a loss. For
companies such as Intel and AMD, who sell products globally, there is a need to manage this exchange rate risk. It is interesting to look at two companies in
the same sector; Intel and AMD to see who they deal with exchange rate risks. Each of these companies has a high level of exposure to exchange rate fluctuations due
to the high level of income that originates outside of the S as well as the level of expenditure that is spent in external countries. Looking at Intel first,
this company makes use of derivatives to hedge against exchange rates changes. The only purpose that the derivatives are used is to protect the companys position and not on a
speculative basis (Intel, 2003). The general approach is that the risks hedged will be those that are not US dollar risks, but the risk types that may be hedged
are both investments as well as debts, the tools used tend to be forward contracts for the currency risk. Here there is a
use for both short and long terms hedges, with a short hedge forward selling currency at a set rate and a long hedge buying them at a set rate (Howells
et al, 1998). For the short hedge the currency that will be realised for the sale of goods can be hedged and for the long hedge the buying of dollars
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