Speculating: problems for industry How do companies hedge against currency fluctuations? An example: https://www.youtube.com/watch?v=FLGRPYAtReo.

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Presentation transcript:

Speculating: problems for industry How do companies hedge against currency fluctuations? An example:

Derivatives MK, U 18, p 92

DERIVATIVE (finance) something such as an option, or a future, based on underlying assets such as shares, bonds, and currencies. Longman Business English Dictionary Cro = derivat, derivatni instrument, izvedenica

MK, p 92 Vocabulary 1F2A3E4D5C6B7H8G What do hedging and speculation have in common?

Discussion: What could the following people or companies do, using futures and derivatives? (MK, p 92) 1 A cocoa grower who thinks the price might drop and a chocolate manufacturer who thinks the price might rise - to arrange a futures contract: the producer gets a _____ _____ selling price, and the buyer gets a ____ _____ _____ price fixed future fixed future buying

2 A company with a lot of fixed interest debt that expects interest rates to fall. -to arrange an _______ ____ ____ with a company with _______ rate debt that expected interest rates to ____. 5 Are the financial instruments in your answers what we call “win-win situations” or “zero-sum games”? Futures, options and swaps are a “zero-sum game”: one party’s gains are ______ to the other party’s losses. “Win-win situations” → negotiations, partnerships interest rate swap floating rise equal

A break?

Graph description, cont. RB, p 36 Work in pairs, describe the graph on p 36 in no more than 300 words. Hand in a copy. (How long is the text on p 35?) HW: Find a graph presenting business/economic data and write a description of it (handwritten). Pls, hand in together with the graph.