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sensitivity analysis

The concept of sensitivity analysis in corporate finance refers to a technique used by businesses exposed to currency risk to test the resilience of a company or a business line to a range of variables in different likely scenarios. The main objective of this exercise is to assess the potential impact of variations in elements […]

set-and-forget hedging strategy

A set-and-forget hedging strategy, also known as static hedging, is a budget hedging program where a big hedge is taken at the start of the period and is not reactivated until this period is over. Set-and-forget or static hedging makes sense for businesses with a high degree of forecast accuracy, rarely adjusted and FX-driven pricing, […]

settlement date

In a business transaction, the settlement date is the date on which it is due for payment in cash. In the chronology of a typical transaction, the settlement date is the last stage. It is preceded by other stages: forecasting, pricing, contracting (SO/PO, sales order/payment order) and recording (AR/AP, accounts receivable/payable). In a FX forward […]

short currency hedge

A short currency is the creation of an offsetting short FX position with forward contracts, in order to neutralize any gain or loss on an original ‘long’ currency exposure by a corresponding foreign exchange loss or gain on the hedge. For example, a U.S.-based exporter sells EUR 100,000 of goods worth to a European customer […]

shortcut method

The shortcut method is a qualitative method of analysis approved only by the US accounting standards to test the effectiveness of a hedge relationship. In order to adopt hedge accounting, companies may use quantitative methods like the dollar offset method or qualitative methods, the most common of which are the critical terms match (CTM) method. […]

soft peg

A soft peg describes the type of exchange rate regime applied to a currency to keep its value stable against a reserve currency or a basket of currencies. Currencies with a soft peg are half way between those with a fixed or hard pegged exchange rate and those with a floating exchange rate. The main […]

stagflation

Stagflation is a term used to describe an economy that is stagnant and experiences little to no economic growth. Signs of stagflation include high rises in the price of consumer goods and services through high inflation, a reduction in gross domestic product and high unemployment. It is exceptionally difficult to move a country out of […]

stop loss order

In the terminology of Currency Management Automation, a Stop Loss order is triggered whenever an adverse movement in the exchange rate automatically triggers the execution of a forward contract aimed at protecting the exposure against further unfavourable movements. When protecting the budget, Stop Loss orders are often set by management when the firm faces a […]

subsidiary

A subsidiary is a company, corporation or limited liability company whose controlling interest is owned by another company. The company with a controlling interest (more than 50% of the subsidiary’s voting stock) is known as the parent company. The subsidiary, which is recognised as a legal entity in its own right, must comply with the […]

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SWIFT messages

SWIFT messages are the messages generated when funds are transferred internationally using the SWIFT international payment network. SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication and is renowned as having the fastest, most secure method for sending financial messages internationally. The main advantages of SWIFT messages include: The fact that all of the […]