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P4-[E] Treasury and advanced risk management techniques - Coggle Diagram
P4-[E] Treasury and advanced risk management techniques
I. The role of treasury function in multinationals
2. Treasury organisation
(Decree of centralisation)
3. Managing risk - using options
Managing the risk of a fall in share values
Delta
Gramma
Other 'greeks': theta (time), Vega (volatility), Rho (rate of interest)
1. Treasury management
Risk management
Corporate finance
Liquidity management (Cash management)
Funding
II. Managing currency risk
(The use of financial derivatives to hedge against forex risk)
3. Currency future
Using basis
1. Currency quotation
Transaction risk
Terminology
2. Brought-forward knowledge
Internal methods (matching and netting)
Forward contracts
Money market hedging
4. Currency options
Exchange traded options vs OTC options: Staddard amounts, flexible dates
Exchange traded options - quotations: Prices quoted as cents per unit of contract currency
Over-the-counter options (OTC): Optional but fixed date
Steps in exchange traded options hedge:
Set up type, number and date of options contracts
Actual transaction at spot rate or option
Net off including premium, shortfall/surplus
III. Managing interest rate risk
(The use of financial derivatives to hedge against interest risk rate)
1. Interest rate risk
3. Interest rate futures - fixing the interest rate
4. Interest rate options - cap the interest rate
5. SWAP
2. Forward rate agreements (FRAs) - fixing the rate