2. Explain translation FE exposure. Is the possibility of a translation loss real and
under what circumstances? Differentiate between #8 and # 52.
This material may consist of step-by-step explanations on how to solve a problem or examples of proper writing, including the use of citations, references, bibliographies, and formatting. This material is made available for the sole purpose of studying and learning - misuse is strictly forbidden.1. We have a 1 billion won payable in one year from now. How do we appropriately hedge ourselves against it?
In this case, the first step is to assess whether the exchange rate movements in the future would be adverse or favorable. When the movements are expected to be favorable, a lesser amount should be hedged while if the movements are adverse, the entire 1 billion won should be hedged. The hedge ratio can be used to determine the quantity to be hedged....