The business firms and the other business entities are guided by certain objectives. Profit maximization has been one the prime objectives of the private business enterprises. Later on, in recent times new theories of business firms have generated alternative objectives of firms. To be specific, the new theories lay stress on the role of managers and their behavioural pattern in [...]
In this article we will discuss about the cost and types of hedging adopted by companies to mitigate exchange rate risk. Cost of Hedging: Companies use contractual and non-contractual methods to hedge exchange rate risk. Transaction exposure is hedged through contractual and non-contractual methods. Translation exposure can be hedged through contractual methods. Operating exposure is difficult to hedge given the [...]
In this article we will discuss about the utility function of investors. Also learn about indifference curves. Utility Function and Risk Taking: Common investors will have three possible attitudes to undertake risky course of action: (i) An aversion to risk, (ii) A desire to take risk, and (iii) An indifference to risk. The following example will clarify the risk attitude [...]