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study: currency exchange rate

Case Study
If your company sells goods and services abroad or receives those
from other countries it is your daily business to secure punctual
deliveries and payments according to contracts as well as dealing
with political and economic risks.
The monitoring of potential exchange rate risks is increasingly
important. In export-transactions there are often several weeks
between the contract signature and the payment in foreign
currency. Due to the volatility of the currency markets, the margin
can be significantly diminished. In a worst case, a profitable
business can even turn into a loss. By concluding forward
exchange contracts you can secure a fixed exchange rate for
future payments in foreign currencies which will then sustainably
reduce your risk.
Situation: A
German
manufacturing
company
exported
equipment worth 100,000 USD. Without hedging the currency
position the company loses 5,301 EUR in a period of less than six
weeks (equals to minus 6.5%) compared to the expected
remuneration for their goods at contract signature.