Question

1. What are key steps in conducting the money market hedge for account receivables?

2. What are key steps in conducting the money market hedge for account  payables?

Answer 1

The key steps in conducting the money market hedge for account recievables. They are-

A money Market Hegde is the technique or defined as a measureance of foriegn risk using the market of money or money market which are highly in nature and short term investment and highly liquid such as bills recievable, bills payables and commercial paper which are traded in market.

There are many steps to hedge. They are -

1. Currency Forward

2. Futures

3. Options

they are the various key steps in conducting the money market hedge for account recievables.

Easy four steps to hedge account recievables -

(1). Borrow the foreign currency in an amount which are equal to present value of Receivable.

(2). Convert the foreign currency into domestic currency using the spot rate.

(3). Domestic currency are in place on deposit at the interest rate.

(4). When foreign currency recievables comes in, then the foreign currency repay with interest.

2. Easy four steps to hegde account payables. They are-

(1). Borrow the domestic currency in an amount equal to the present value of payables.

(2). Convert the domestic currency into foreign currency by using spot rate.

(3). Foreign currency are in place of deposit.

(4). When foreign currency matures then make the payment.