Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key


Play button


Play button




Click to flip

12 Cards in this Set

  • Front
  • Back
Three differences between forwards and futures
1. forwards private; futures traded
2. forwards customized; futures standardized
3. forwards have no daily settlement; futures have daily settlement
Intrinsic Value = ?
Intrinsic Value = Spot - Strike
Time Value = ?
Time Value = Call Premium - Intrinsic Value
Call Option Price Relationships with Strike, Spot, Rd, Rf, t, volatility
Strike = -
Spot = +
Rd = +
Rf = -
t= +
volatility = +
Current rate method
1. functional is not $
2. TA-TL
3. CTA, bypass income statement
Temporal method
1. function is $
2. MA-ML
3. goes to income statement
What is translation exposure?
Changes in income statement items and the book value of balance sheet assets and liabilities that are caused by an exchange rate change. This measurement is retrospective because it is based on activities that occurred in the past.
What is operating/economic exposure?
Changes in the amount of future operating cash flows caused by an exchange rate change. Prospective because it is based on future activities. (Big picture, competitive)
What is transaction exposure?
Changes in the value of outstanding foreign currency denominated contracts that are brought about by an exchange rate change. This is a mix of retrospective and prospective because it's based on activities that occurred in the past, but will be settled in the future.
3 Natural Hedges
1. Input sourcing
2. Plant location
3. Shifting production
3 Reasons for adjusting transfer prices
1. tax minimization
2. avoid exchange controls
3. disguise profitability in less developed country (LDC)
3 Step approach in project evaluation
1. project as if stand-alone
2. adjust for project-parent flows
3. adjust for global project interactions