［2008］Topic 37: Identifying and Managing Cash Flow Exposures相关习题 sales, exchange, company, example, recent

Baran

AIM 1: Describe how to measure cash flow exposure to exchange rates and compute the optimal hedge ratio.

 

1、Judy Starks is assessing her company’s exposure to exchange rate fluctuations. Starks’ immediate concern is conserving the dollar value of receivables associated with recent sales abroad. This is an example of:

A) contractual exposure.
 
B) competitive exposure. 
 
C) transactions exposure. 
 
D) price exposure.

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Baran

The correct answer is D

The coefficients from this type of regression are estimates of optimal hedge ratios. Weaknesses of this approach include the fact that the regression model assumes simple linear relations and that coefficient estimates are both sensitive to erroneous exclusion of risk factors and based on historical data, which makes the hedge ratios inherently backward-looking.

Baran

AIM 5: Describe the delta exposure of cash flow, its estimation when there are non-linear exposures to a risk factor.

 

1、Based on a single futures contract, which of the following cases is least likely to render a static hedge of foreign exchange exposure ineffective?

A) Exposure to uncorrelated price and quantity risks.
 
B) Multiple, perfectly correlated risk exposures. 
 
C) A nonlinear exposure to changes in the exchange rate.
 
D) Multiple, nonlinear exposures.

Baran

The correct answer is B

Nonlinear risk exposures and exposures to multiple uncorrelated risk exposures reduce the effectiveness of a static hedge based on a single futures contract.

Baran

2、Using the following regression to estimate changes in firm value, what is the marginal impact of a 10% increase in the value of the GBP?

Rz = α + 0.9 RM + (?0.3) RGBP

Where:

RZ = return for firm Z

RM = return on a market index

RGBP = percentage change in the USD/GBP exchange rate

 

A) - 3%.
 
B) - 10%.
 
C) - 9%.
 
D) - 30%.

Baran

The correct answer is A

(?0.3) × 0.1 = ?0.03 = ?3%

Baran

3、One approach to estimating a company’s exposures when there are multiple risk factors is to regress the return on the firm’s equity on percentage changes in risk factors. The major advantage of this approach is:

A) it incorporates nonlinearities in the relation between cash flows and risk factors.
 
B) it is robust to erroneous exclusion of potential risk factors.
 
C) regression coefficients are inherently forward-looking.
 
D) regression coefficients provide estimates of hedge ratios.

Baran

The correct answer is A

It is impossible to construct a perfect hedge with a single futures contract when there are two uncorrelated sources of risk.

Baran

6、All of the following are methods of estimating a firm’s exposure to exchange rate risk EXCEPT:

A) estimating the slope of the demand curve.
 
B) constructing pro forma cash flow statements under various scenarios. 
 
C) simulation analysis based on exchange rate volatility.
 
D) regression of firm value changes on exchange rate changes.