Skip to content
Sign inRegister

Ask the Tutor ACCA AFM

Currency Hedging Effect on share price?

Ssameed12y ago
Hi John, can you kindly explain me briefly that if a company does or does not hedge it's foreign currency risk, can it have an effect on share price of a company? And can we roundfoff 1.645 standard deviations away fro mean to just 1.6 as given in tables? thanks.
John MoffatJohn MoffatTutor12y ago#1
If a company does not hedge the risk, then it does make the company more risky. This can result in the shareholders requiring a higher return because of the risk, and therefore a lower share price. Yes - no problem rounding off 1.645, but round it to 1.64 (not to 1.6) because you can look up standard deviations to two decimal places on the tables.
Ssameed12y ago#2
Ok thanks a lot
John MoffatJohn MoffatTutor12y ago#3
You are welcome :-)
Sign into reply to this topic.