The CEO of an Australian-based firm was overheard to say "Why bother to try to manage exchange risk? The ups and downs of exchange rate movements wash out over time." What would you say to this CEO? "Currency options, forwards and futures have in common the disadvantage that, while protecting a hedger against losses, they also prevent the chance of making a profit from favourable exchange rate movements." Is this statement correct? Discuss.

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To the CEO who questions the importance of managing exchange rate risk due to the belief that exchange rate movements wash out over time I would offer the following points 1 Volatility and Uncertainty ... View the full answer