Foreign Exchange: Off antithesis of the cover

Foreign Exchange: Off antithesis of the cover Tube. Duration : 8.10 Mins.

The example of a bank with U.S. dollar-denominated liabilities, that invests abroad, financed by borrowing in sterling previously checked: 1 A hedged foreign currency risk: if you pound depreciated against the dollar, the returns of exchange bank and two eroded. Hedge balance sheet: Bank takes hit in part by financing with debt pounds, so that if foreign currency depreciates, it is the net yield of the loan is reduced, but the cost of financingis also reduced. 3 is the off-balance scenario: The bank sells the pound

Tags: Finance, risk, foreign, currency, exchange, fx

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Posted in: antithesis,Exchange,Foreign