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Hedging foreign exchange risk

9.2 The tabular method for multilateral netting and matching

 Step by step approach:

1 Set up a table with the name of each company down the side and
across the top.

2 Input all the amounts owing from one company to another into the table

and convert them into a common (base) currency (at spot rate).

3 By adding across and down the table, identify the total amount payable
and the total amount receivable by each company.

4 Compute the net payable or receivable, and convert back into the
original currency.

Illustrations and further practice

Now try TYU 8 in Chapter 10

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