Hedging Example

Essays on Hedging Essay Topic: Hedging XXXXXXXXXX XXXXXXXX XXXXXXX XXXXXX XXXXXXXXXX Hedging is an activity that allows firms to minimize risks resulting from changes in rates of exchange in the foreign exchange market. These firms mostly operate internationally, meaning that they have affiliate firms in more than country. Variations in the exchange rate pose risks to these firms in the context of operations and sales (Albuquerque, 2007, pg. 17). VirtualBooks Company in the UK is affiliated to another firm in Slovakia. Readers are to be imported for sale in the UK, a situation which puts the UK firm to a risk, owing to the exchange rate characteristic to the different currencies involved in the transaction. Variations in the exchange rate between the Euro and the Sterling Pound may cause the UK firm losses or profits based on the adopted hedging strategy. Based on the chart provided, hedging instruments will be assessed in relation to each currency, and the best hedging strategy for the UK firm determined. Forwards A forward is a contract or an agreement that involves foreign exchange rates, where the parties bound to the agreement are obliged to buy or sell a specified foreign currency amount at a given time in future (Muller, 2006, pg. 195). However, the exchange rate is fixed in the current time based on the current exchange rate. The provided chart denotes the variations in the exchange rate of the two currencies involved; the Euro and the Sterling Pound. The chart represents increases and decreases in the amount of Euros required to purchase one Sterling Pound. The general implication of the chart is that the Euro is averagely cheap compared to the sterling Pound. The Slovak affiliate firm is expected to export readers for sale in the UK. The importation of readers into UK from Slovakia is favourable given the exchange rate trend on the chart. The UK based firm is therefore due to make profits from the sale. However, the exchange rates movement is uncertain. In this regard, the Slovak affiliate may enter into a forward contract, where the counterpart will buy the Sterling Pounds paid by the UK firm. The Slovak firm gets its due Euros prior to the agreed exchange rate, thus minimizing the loss that would have otherwise resulted from exchange rate fluctuations. Futures This is another form of a forward contract. In this case however, the exchange trade is standardized and strictly based on specific times of maturity. Futures only mature at specific times denoted by one, three, six, nine and twelve months or in three years (Muller, 2006, pg. 210). Both the UK and the Slovak affiliate firms may experience difficulties in matching the maturity periods if they choose this hedging strategy. The exact amounts of foreign currency in the context of the underlying risk exposure may be difficult to determine. In this case, using futures as a hedging strategy is not advisable. Options This hedging strategy offers a choice in exercising the agreement that binds the parties to the option. The buyer or the seller may choose to exercise the option or fail to (Capstaff, 2007, pg. 117). The Slovak firm may buy an option to sell Sterling Pounds when the payment is done by the UK firm after it imports the readers. The strike price is an important factor that will determine the Slovak firm will exercise the option or not. A strike price higher than the Euro at the maturity time of the option will make the Slovak firm exercise the option and vice versa. When the strike price is low, the firm will consider not exercising the option, thereby selling the Sterling Pounds in the foreign exchange market. Such would be the case in the UK when the firm is importing. The fundamental issue here is to maximize business welfare by reducing the risks accrued from exchange rate variations. The flexibility associated with the options in relation to the currency flow provided in the chart makes options the best hedging instrument for the company. References Albuquerque, R. (2007): Optimal Currency Hedging, in: Global Finance Journal, 18(1), 16-33. Capstaff, J., A. Marshall and J. Hutton (2007): The Introduction of the Euro and Derivative Use in French Firms, in: Journal of International Financial Management and, 18(1), 117. Muller, A. and W. Verschoor (2006): European Foreign Exchange Risk Exposure, in: European Financial Management, 12(2), 195-220.

Narrative of Quinceanera Essay Example For Students

Narrative of Quinceanera Essay From a Little Girl to A Young Woman Linda Rosario English 1A Professor Abra Mcdowell July 14, 2010 From a Little Girl to a Young Woman . The day of my Quinceanera started early. I had just turned 15 and it was the birthday I had always dreamed of. I was always a dama in other Quinceanera’s, but now it was time for my own celebration. In Mexican culture, a dama is just like a bridesmaid. I had 14 of my closest friends as my dama’s to be a part of my â€Å"court of honor†. All 14 girls wore beautiful hot pink dresses and had polished hairstyles. The girls looked like beautiful dolls. When my mother was a little girl she had two Quinceanera’s. One celebration took place in Mexico and the other here in California. Looking back at my moms photo’s, I could see that both celebrations were huge and costly. I was the first of all my cousins to have a Quinceanera. My mother and other family members worked for over a year to plan the celebration that followed. It was the morning of my special day, there was so much to do and not much time to get it done. I had a 7 a. m. hair appointment to sweep my brown hair up in preparation for the crown t I would receive during the ceremony. I then had to rush back home to dress in my light pink ball gown before heading to the church. I arrived to a church crowded with friends and family. So many people had gone to St. John’s Cathedral to witness the simple, yet elegant, tradition. There were also relatives from Mexico and Puerto Rico who took the long tiring trip to attend. I was honored to see so many people there on my special day. My court of honor led the way into the church. When it was my turn to walk down the aisle, soft music was played by the organist. I felt like a princess walking in my big, beautiful ball gown. My gown was similar to a wedding dress except it was a pastel pink. When the ceremony started it was nerve racking. I was thinking about my hair and people staring at me from behind, and hoping my tiara or hair wouldn’t come down. I was hoping and praying that I didn’t fall on my face when I walked down the steps. Somehow, I managed to keep a smile on my face as if I had no fears. The ceremony included Bible verses and singing. I received six gifts from my aunts and uncles: a Bible, a bouquet of flowers, a ring, a bracelet, a rosary and a tiara. Each of them was blessed by the father. Each gift I received held a meaning: closeness with family and with God, and the passage to womanhood. Later that day, the celebration continued with a party at Eagles Banquet Hall. As the festivities started, I was so happy about the night to come. My court of honor was introduced as they led me into the celebration. We started out the night by performing a traditional Quinceanera march. It was a choreographed routine that we practiced for five months leading up to that day. My father came out with tears in his eyes and softly removed my ballerina slippers from my feet and replaced them with a pair of woman’s heels. With tears in his eyes, he grasped and hugged me so tight it was as if he didn’t want to let me go. My father and I started to dance the traditional father daughter dance. As the song was coming to the end, my father whispered in my ear, â€Å" You’re a beautiful young woman, but you will always be my baby girl. † At that moment, tears filled my eyes and I realized how much love my father had for me. I will always remember that moment for the rest of my life. My birthday was celebrated with a wedding style cake and 15 candles marking my age. It was 15 different tiers with 5 different flavors. .ud0ffdd18e6aacc17e54169f299e271fb , .ud0ffdd18e6aacc17e54169f299e271fb .postImageUrl , .ud0ffdd18e6aacc17e54169f299e271fb .centered-text-area { min-height: 80px; position: relative; } .ud0ffdd18e6aacc17e54169f299e271fb , .ud0ffdd18e6aacc17e54169f299e271fb:hover , .ud0ffdd18e6aacc17e54169f299e271fb:visited , .ud0ffdd18e6aacc17e54169f299e271fb:active { border:0!important; } .ud0ffdd18e6aacc17e54169f299e271fb .clearfix:after { content: ""; display: table; clear: both; } .ud0ffdd18e6aacc17e54169f299e271fb { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .ud0ffdd18e6aacc17e54169f299e271fb:active , .ud0ffdd18e6aacc17e54169f299e271fb:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .ud0ffdd18e6aacc17e54169f299e271fb .centered-text-area { width: 100%; position: relative ; } .ud0ffdd18e6aacc17e54169f299e271fb .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .ud0ffdd18e6aacc17e54169f299e271fb .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .ud0ffdd18e6aacc17e54169f299e271fb .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .ud0ffdd18e6aacc17e54169f299e271fb:hover .ctaButton { background-color: #34495E!important; } .ud0ffdd18e6aacc17e54169f299e271fb .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .ud0ffdd18e6aacc17e54169f299e271fb .ud0ffdd18e6aacc17e54169f299e271fb-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .ud0ffdd18e6aacc17e54169f299e271fb:after { content: ""; display: block; clear: both; } READ: Interpretations of Love EssayMy favorite was the chocolate. The cake was so moist and delicious. It was served following dinner which consisted of traditional Mexican dishes. I could smell the food and it smelled delicious. The aroma of garlic and peppers from the slow roasted beef filled the air. The spices of cumin and cilantro from the Spanish rice made my my mouth water. When I walked into the room it reminded me of my grandmother’s kitchen. She always made delicious Mexican food. For my celebration my grandmother cooked all of the authentic Mexican dishes for all the guest to enjoy. After dinner, the party continued well into the night. I could hear laughter and joy all around. I saw everyone dancing to traditional music and enjoying themselves. I was dancing with all of my relatives and other friends that were on the guest list. Usually I wouldn’t dance in front of my school friends, but on that night I was not embarrassed at all. Nothing seemed to matter, it was my night. My Quinceanera was the one night that I was the center of attention, and the night I was no longer considered a child. I was now a young woman.