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Natural currency hedging

Natural currency hedging is a method of protecting a company against currency risk consisting in holding two assets whose value changes offset each other. The negative change in the value of one currency is neutralised by a positive change in another currency. It is known as ‘natural’ hedging as it does not involve sophisticated, costly financial products. It […]

Net Investment Hedge

The IFRIC 16 interpretation of the IFRS standards defines a net investment hedge of a foreign operation sd the derivative product aimed to minimise the impact of foreign exchange fluctuations for a net investment in a foreign operation. For derivative financial instruments to be considered as net investment hedges, the effective proportions of profit or […]

Netting

In general terms, netting refers to the practice of consolidating two different settlements in order to create a single value. More info Currency Accounts International Payments Payments Hub How does netting work? For instance, if Company A owes $50,000 to Company B and Company B owes $40,000 to Company A, they can set a netting […]

Non-Convertible Currency

A non-convertible currency, also known as a “blocked currency”, is the legal tender of a country that is not traded at all on the international foreign exchange market, usually because of government restrictions. It is normally a method of protection as a non-convertible currency’s economy is usually particularly vulnerable to market movements. If the non-convertible […]

Nonmonetary assets and liabilities

Nonmonetary assets and liabilities is a financial accounting term that refers to all the company’s assets and liabilities whose value cannot be not easily converted into cash or cash equivalents. Examples of a company’s nonmonetary assets include tangible assets such as inventory and property, raw materials, plant and equipment and intangible assets like intellectual property […]

Notional amount

In foreign exchange, the notional amount, also known as the notional principal, or the notional value, is the amount of currency to be sold and bought. It is important to remember that in FX there are always two notionals, as a currency exchange will always involve two currencies. A party to a currency transaction is […]