What are the arguments against a MNC hedging transaction exposure? Why should companies not hedge?
What are the arguments against a MNC hedging transaction exposure? Why should companies not hedge?
Homework Answers
Arguments against companies hedging transaction exposures are-
1. Hedging involves a cost too and if profit is lesser than the cost , hedging is not appropriate
2 . Transaction hedging not just curtails down the risks but it also curtails down the overall reward associated with that transaction.
3. Transaction hedging is against the fundamentals of the foreign exchange markets.
4. Transaction hedging is against the basic idea of entering into the same transaction as transaction hedging reflects more of the uncertainty of the transaction.
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