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Non-Tech : Derivatives: Darth Vader's Revenge
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To: JBTFD who wrote (1076)4/2/2002 10:55:50 AM
From: Ahda  Read Replies (1) of 2794
 
Derivatives International companies also hedge dollars. I don't know the term to use other than a hedge as they are buying insurance to cover all directions of currency.

This does not add to earnings it amounts to the cost of protection of dollars.

I suppose if one got too creative here and left themselves open to injury by carrying a put on one currency to avoid down side injury instead of a put and call on all currency involved there could be a catastrophe in the making.

Financial instruments are very varied. In the above case they are used to protect from risk yet are a cost to profit.

In enrons case I feel it wasn't so much derivative exposure rather a new derivative of standard accounting procedures that caused the demise.
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