Hedging profits effectively
REAL-LIFE PROBLEMS, INNOVATIVE SOLUTIONS
Background
European corporates are increasingly worried about hedging their FX exposure from USD overseas profits, especially given the USD depreciation over the past few years against the EUR. As a consequence, 'profit translation hedging', previously perceived as a practice exclusive to big multinationals, is now becoming a frequent concern for every treasurer that has to deal with profits from foreign subsidiaries.
Moreover, the path of EUR/USD spot during 2005 has created an opportunity to
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