Question

Money Market Hedges. How does a money market hedge differ for an account receivable versus that of an account payable? Is it really a meaningful difference?

Answer 1

Money market hedge for account receivable	Money market hedge for account payable
Borrow the foreign currency equivalent to the amount of present value of receivable	Borrow the domestic currency equivalent to the amount of present value of payable
Covert the foreign currency amount into domestic currency at the spot rate	Covert the domestic currency amount into foreign currency at the spot rate
Deposit the amount in a bank at a current interest rate	Deposit the amount in a bank at a current interest rate
When the foreign currency is received from the customer, repay the loan taken on foreign currency along with interest	When the foreign currency deposit matures, make the payment to the vendor.

As you can interpret, both the transactions are the opposite. Hence, it would be fair to say that difference is meaningful.

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