• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

Congratulations to Jamil from Pakistan and Jeeva from Malaysia - Global Prize winners!
see all ACCA December 2022 Genius Hunt Competition winners >>

Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>

Hedging methods NOT be suitable for hedging

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Hedging methods NOT be suitable for hedging

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • June 3, 2021 at 5:33 pm #622984
    HamzaYusuf
    Member
    • Topics: 38
    • Replies: 19
    • ☆☆

    Which of the following hedging methods will NOT be suitable for hedging the euro receipt?

    A Forward exchange contract
    B Money market hedge
    C Currency futures
    D Currency swap

    The correct answer is D but I couldn’t understand that why Currency Swap is not suitable for hedging the Foreign exchange rate even though it is mentioned in the notes as one of the hedging techniques? Please explain!

    June 4, 2021 at 7:15 am #623044
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51532
    • ☆☆☆☆☆

    You do not state what euro receipt is being referred to.

    I would guess that it is a receipt in the near future.

    Currency swaps are not relevant for individual ‘one-off’ receipts are are long-term rather than short-term hedging.

    I do explain this in my free lectures.

    June 4, 2021 at 4:42 pm #623192
    HamzaYusuf
    Member
    • Topics: 38
    • Replies: 19
    • ☆☆

    Yes, you are correct that the company expects to receive €1,500,000 in six months’ time. 🙂

    Can you please explain what you meant by “individual one-off receipts”?

    And the rest of the methods for hedging are short-term such as Forward Contracts, Money Market hedge, Futures, Options?

    Thanks for your reply 🙂

    June 5, 2021 at 9:05 am #623236
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51532
    • ☆☆☆☆☆

    Swaps are more relevant if they are borrowing (or depositing) money for a longer period and there is therefore interest each year rather than just one receipt or one period.

    The other methods are all suitable for hedging short-term risk.

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

 

ACCA My Exam Performance for non-variant Applied Skills exams is available NOW

NEW! Download the ACCA Pass Guide

FREE Verifiable CPD for ACCA Members

ACCA mock exams and debrief videos

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

Donate

If you have benefited from OpenTuition please donate.

ACCA CBE 2023 Exams

Instant Poll * How was your exam, and what was the result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • tmatanga2008@gmail.com on IASB Conceptual Framework – Introduction – ACCA Financial Reporting (FR)
  • John Moffat on Capital asset pricing model (part b) – ACCA Financial Management (FM)
  • John Moffat on Capital asset pricing model (part b) – ACCA Financial Management (FM)
  • palbu on Basic group structures – Impairment – ACCA (SBR) lectures
  • AkilaShaikh on Capital asset pricing model (part b) – ACCA Financial Management (FM)

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy