IF CURRENCY HEDGING IS SO BENEFICIAL, DO COMPANIES USE ALL HEDGING Essay

IF specie HEDGING IS SO BENEFICIAL, DO COMPANIES USE ALL HEDGING TECHNIQUES AVAILABLE - Essay Examplects of risks and presage losses in foreign exchange transactions, why has the ambit and scope of hedging not as well been extended to other forms of speculative short letter, or even if it has, why is this that it has met only with a limited full stop of success and accomplishment?The hedging strategy enables the investors/company to gain a clear understanding intimately the happening of the various events that may lead to loss of money for the investors. Foreign cash markets are flip overed to be very deep, relatively inexpensive and highly liquid where the fund managers are trying to manage their currency options in the foreign investment market. Currency hedging is the most frequently use approach used to manage the degree of risk that is involved in the foreign investment strategies.Research Hypothesis why degree of success of currency hedging cannot be derived from oth er types of non-currency losses or risks, given that in twain cases, there is a great deal of monetary value involved in both speculative and currency transactions.That being said, it is necessary to first find out what are the relative advantages of use currency hedging during foreign exchange transactions. Currency hedging can be defined as a particularhedgingstrategyused to reducerisksin the foreign exchange market.We shall consider for a brief moment that there is an importing company in Australia for wheat products, and similarly, there are exporters in London who are shipping the products to Australia. The Australian importing company is worried that if the value of GBP comes down, they would exact to pay more for the purchase during future settlement. The current exchange rate is 1 = AUS $ 1.7796. (Market rates, 2009).If the value of the GBP fall below 1.7796, he would have to pay more AUS $, and then incur losses. The currency exchange fluctuations may be minimal in the event of small transactions, but in the event the import business is for a few billion dollars,