Simulating FX Hedging Strategies

To become proficient in any skill, including currency risk management, practice makes perfect. To help companies practice in 2021, FX Initiative’s Foreign Exchange Transaction Simulator addresses a wide variety of FX scenarios by stress-testing hypothetical FX hedging strategies.

This interactive risk modeling tool illustrates the economics and accounting of the most common hedging strategies for underlying foreign exchange exposures such as revenues, expenses, receivables, and payables. You can simply input your company specific and foreign exchange market variables, and then select your hedging strategy, which includes not hedging or hedging with a forward contract, vanilla option or zero cost collar.

The resulting output is a highly detailed interactive FX risk analysis that charts the economic payoff of your selected hedging strategy, ranks the alternative hedging strategies, and reports the accounting journal entries and t-accounts with authoritative references to U.S. generally accepted accounting principles (GAAP). Behind the scenes, our robust pricing engine and database simplifies the risk analysis process for you so you can focus on the bottom line impact to your business.

This versatile tool transforms 16 inputs into one information rich analysis in 3 easy steps.

• Step 1 is to select (1) the Underlying Exposure and input the related variables of (2) Functional Currency, (3) Foreign Currency, (4) Underlying Notional Amount, (5) Beginning Exchange Rate, (6) Currency Quoting Convention, (7) Start Date, (8) End Date and (9) the Day Count.
• Step 2 is to select a (10) Hedging Strategy and input the related variables of (11) Hedge Ratio %, (12) Domestic Interest Rate, (13) Foreign Interest Rate, (14) Implied Volatility, and (15) the Collar Range.
• Step 3 is to forecast (16) the ending exchange rate to see how positive and negative changes in exchange rates impact the cash flow and financial reporting of your selected hedging strategy.

This FX risk management web application customizes strategies and can be modified efficiently and effectively. For example, if you want to change your underlying exposure or hedge strategy, it’s as simple as one-click. If you want to know which strategy yields the best outcome, all 4 strategies are ranked for you automatically. If you want to see how the default or elective accounting treatment differ, the journal entries and t-accounts are instantly presented side-by-side. This Foreign Exchange Transaction Simulator acts as your own personal quantitative analyst, and puts you in a positions to make a qualified foreign exchange risk management decisions.

To begin practicing hypothetical FX hedging, start your FX risk management training today, which provides 24/7 365 access to our complete suite of foreign exchange (FX) continuing professional education (CPE), examples & events at FXCPE.com.

Hypothetical FX Hedging

To become proficient in any skill, including currency risk management, practice makes perfect. To help companies practice, FX Initiative’s Foreign Exchange Transaction Simulator addresses a wide variety of FX scenarios by stress-testing hypothetical FX hedging strategies.

This interactive risk modeling tool illustrates the economics and accounting of the most common hedging strategies for underlying foreign exchange exposures such as revenues, expenses, receivables, and payables. You can simply input your company specific and foreign exchange market variables, and then select your hedging strategy, which includes not hedging or hedging with a forward contract, vanilla option or zero cost collar.

The resulting output is a highly detailed interactive FX risk analysis that charts the economic payoff of your selected hedging strategy, ranks the alternative hedging strategies, and reports the accounting journal entries and t-accounts with authoritative references to U.S. generally accepted accounting principles (GAAP). Behind the scenes, our robust pricing engine and database simplifies the risk analysis process for you so you can focus on the bottom line impact to your business.

This versatile tool transforms 16 inputs into one information rich analysis in 3 easy steps.

• Step 1 is to select (1) the Underlying Exposure and input the related variables of (2) Functional Currency, (3) Foreign Currency, (4) Underlying Notional Amount, (5) Beginning Exchange Rate, (6) Currency Quoting Convention, (7) Start Date, (8) End Date and (9) the Day Count.
• Step 2 is to select a (10) Hedging Strategy and input the related variables of (11) Hedge Ratio %, (12) Domestic Interest Rate, (13) Foreign Interest Rate, (14) Implied Volatility, and (15) the Collar Range.
• Step 3 is to forecast (16) the ending exchange rate to see how positive and negative changes in exchange rates impact the cash flow and financial reporting of your selected hedging strategy.

This FX risk management web application customizes strategies and can be modified efficiently and effectively. For example, if you want to change your underlying exposure or hedge strategy, it’s as simple as one-click. If you want to know which strategy yields the best outcome, all 4 strategies are ranked for you automatically. If you want to see how the default or elective accounting treatment differ, the journal entries and t-accounts are instantly presented side-by-side. This Foreign Exchange Transaction Simulator acts as your own personal quantitative analyst, and puts you in a positions to make a qualified foreign exchange risk management decisions.

To begin practicing hypothetical FX hedging, start your FX risk management training today, which provides 24/7 365 access to our complete suite of foreign exchange (FX) continuing professional education (CPE), examples & events at FXCPE.com.

May 2019 Newsletter

EDUCATION | EXAMPLES | EVENTS   May 2019 Newsletter Learn How To Manage FX Risk Featured Course The FX Market Overview course explores the concepts of economic globalization and international trade, examines the evolution and operations of the foreign exchange (FX) market, and demonstrates how supply and demand impact FX rates and forecasting. Read More » Featured Resource The FX Terms Glossary defines key terms related to FX risk management. This online dictionary is designed to clarify the FX conversation, and helps you develop a working vocabulary of important and frequently encountered concepts concerning foreign currency. Read More » Featured Webinar The FX Risk Management webinar focuses on the fundamentals of corporate FX risk management, explores how leading multinational firms prioritize and manage the 3 types of FX risks, and demonstrates best practices for assessing your company’s FX risk profile. Read More »   support@fxinitiative.com | 312-566-7475 | www.fxcpe.com     © FX Initiative, LLC | All rights reserved | Unsubscribe from list.

How to Test FX Transactions & Hedge Strategies

Ready to learn how to test FX transactions & hedge strategies? FX Initiative’s Foreign Exchange Transaction Simulator is a risk modeling tool that illustrates common FX exposures such as revenues, expenses, receivables and payables. The result is a detailed and interactive FX risk analysis that charts the economic payoff of a hedge strategy along with accounting journal entries and references to U.S. generally accepted accounting principles (GAAP). This tool serves to simplify the risk analysis process for you so you can focus on the practical bottom line impact to your global business. Get started with our foreign exchange risk management training, which provides 24/7 365 access to our complete suite of foreign exchange (FX) continuing professional education (CPE), examples and events at FXCPE.com. Start Training >

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