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Essay / Research Paper Abstract
This 20 page paper considers the major international financial risks that may be faced by a compnay trading in different areas and then looks at how these risks may be mitigated with tools such as hedging. The bibliography cites 15 sources.
Page Count:
20 pages (~225 words per page)
File: TS14_TEinfinrisk.rtf
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Unformatted sample text from the term paper:
what those risks are and how they may be mitigated. In the case provided by the student we see a complex situation. 18% of the production of the motor
vehicles is made in Hungary but it does not appear that any of the vehicles are sold here. Of the other areas of operation Italy and Spain where 55% and
20% of the vehicles are manufactures also have 45% and 10% of the sales as well as 19% of the sales to France. These countries have the same currency and
are also under the European Central Bank (ECB) so the risks are minimal as there is no exposure to exchange rates and interest rates will be the same set by
the ECB as the central bank. Other areas are separate currencies, such as the UK, Hungary and Belgium are not within the single European currency area. This means there
is an exposure to the exchange rate fluctuations. However, in all areas there are some risks. We will first look at the idea of risk and how this may be
seen and then consider the ways it may be mitigated. A major interest international finance is the determination of the exchange rates. For
most countries there are floating exchange rates, this means that the value of the currency against other currencies will be determined by the markets. There are several influences on this,
which will all interact. The role of supply and demand is the main factor. Where there is a greater demand for currency the value against other currencies will increase,
where the demand falls there will be a decrease in the value. There are many factors that will impact on the demand for the currency. Where changes occur a loss
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