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hi guys,
for netting and matching, i know i need to convert all flows to domestic currency, but if i’m given buy&sell rates, which do i used??
thanks~
Netting and matching themselves do not involve converting currency. They simply net off a foreign receipt with a foreign payment.
After you have netted then you look at ways of dealing with the risk on the net payment or receipt.
What you may be confusing it with is that there have been one or two questions involving netting group company receipts and payments to other companies in the group. Here you need to follow the instructions in the question, but usually they convert all transactions to the same currency and then net them off. The times this has been relevant in the exam, you have been told what rate to use (the mid-market or average). However there is no rule – a company set its own rules and therefore the question would have to tell you.
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