Page 223 - 5.2 i. Manac Finance ITC Summarised Notes

THE TREASURY FUNCTION

External hedging techniques

• Money market hedge ( refer to examples in textbook)

• The use of derivatives

Definition: A derivative is a financial instrument whose

value is derived from the performance of

underlying market factors (securities, interest rates,

exchange rates, etc.)

Derivative transactions include:

• Forward exchange contracts (FEC)

• Foreign exchange futures contracts

• Foreign exchange option contracts

• Currency swap NB: Calculations in chapter 15

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