Matching concept

This topic has 3 replies, 2 voices, and was last updated 10 years ago by John Moffat.

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August 26, 2015 at 12:23 am #268535
Ehsan
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Dear Sir,

In foreign exchange risk…. if we use matching doesn’t it mean that there will be tie situation, no gain no loss, ?
August 26, 2015 at 8:17 am #268563
John Moffat
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That is the aim of all the methods of attempting to manage foreign exchange risk!

(and don’t call it a concept – its not a concept but a method that might be applicable)
August 26, 2015 at 9:32 pm #268698
Ehsan
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So sir, if A is expecting to receive $100 from country X in few months time.
In matching method, if A want to safeguard himself from future exchange rate movements A can borrow money of same amount of $100 and then convert it to their local currency.When A is about to receive from his customer he can pay off the loan from that amount. Am I right?

Is it same as Market hedging ?

Regards
August 27, 2015 at 8:33 am #268741
John Moffat
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This is money market hedging (it isn’t matching – to see what matching is you should look at the lecture notes / watch the lecture. You will not be asked arithmetic on matching. The only calculations will be on money market hedging and using forward rates.)
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