Analyze the different types of foreign exchange risk exposures faced by a global business and describe the hedging techniques available to mitigate these risks.

A global business faces several types of foreign exchange risk exposures, each requiring specific hedging techniques: 1. Transaction Exposure: This arises from future contractual cash flows denominated in foreign currencies. For instance, a US company exporting goods to Europe with payment in Euros faces transaction exposure. If the Euro depreciates against the US dollar before the payment is received, the company receives fewer dollars, reducing its profits. Hedging Techniques: Forward Contracts: Lock in the exchange rate for a future transaction, guaranteeing the amount of dollars received regardless of future currency fluctuations. Futures Contracts: Similar to forward contracts but traded on exchanges, offering standardized contracts and liquidity. Money Market Hedge: Involves borrowing in the foreign currency, converting it to the domestic currency at the current spot rate, and investing the proceeds in the domesti....