About This Chapter
Hedging & Strategic Decision Making - Chapter Summary
The old adage, 'you have to spend money to make money,' underscores the fact that you have to take risks in business. This chapter takes a look at risk in relation to hedging and hedge funds, and the lessons demonstrate how hedging and strategic decision making can be used to control the level of risks businesses pursue. Our chapter materials have been created by experienced educators who know the latest trends in the field. By completing the chapter, you will be able to:
- Explain the structure of a typical hedge fund
- Point out the determinants and results of hedging operating exposure
- Assess how foreign currency exposure can be managed through hedging transactions
- Summarize hedging interest rate exposure with interest rate risk management
- Explain the different strategies for increasing global market exposure
- Detail decision-making practices in a global business
- Compare sources for long-term and short-term financing
- Use the formula for calculating net working capital
- Differentiate between strategic trade policy and international trade policy
- Establish how Heidelberg Cement implemented hedging management strategies
1. Decision-Making in a Global Business
In this lesson, we explore decision-making in a global business environment, and look at executives as proactive or reactive. They can be aggressive with decision-making or stay passive with decision-making.
2. Strategies for Reaching Global Markets: Examples & Types
In 2013, the global market had over seven billion potential consumers with needs and wants to be fulfilled. In this lesson, you'll learn about strategies businesses can use to tap this immense market.
3. Hedging in Finance: Definition & Example
When individuals and institutions have investments in the stock market, they are exposed to the risk of financial losses. In this lesson, we'll learn about a way to protect against some losses, known in the financial industry as hedging.
4. What Is a Hedge Fund? - Definition, Structure & Examples
In this lesson, we will discuss the nature of hedge funds, illustrate investment strategies, and reveal their appeal and controversy. We'll also make comparisons between a hedge fund and a mutual fund and present the overall structure of a hedge fund.
5. Interest Rate Risk Management with Hedging Interest Rate Exposure
In this lesson, you will address how to manage interest rate risk by hedging exposure. Various hedge instruments are detailed, including forward rate agreements, futures contracts, interest rate swaps, and option contracts.
6. Global Equity Portfolio: Definition & Strategies
This lesson defines global equity portfolio. You'll differentiate it from an international equity portfolio before going over some important considerations related to the former.
7. Case Study: Hedging Management at Heidelberg Cement
Heidelberg Cement is an international company that hedges 100% of certain transactions. This case study reviews the Heidelberg strategy, execution, and outcome associated with its derivative-based hedging practices.
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Other chapters within the Finance 302: International Finance course
- Foundations of International Finance
- The Balance of Payments in International Finance
- History of Money & Finance
- Globalization & Multinational Firms
- Foreign Exchange Markets
- Currency Changes in International Finance
- International Capital Markets
- Risk Management in International Finance
- Capital & International Financial Management
- International Financial Scams & Crises
- Required Assignments for Finance 302