The probability of receiving advance

The gap is largely determined by the legislative regulation of the country and the conditions of financial contracts. The vast majority of transactions in which payments are made, provides an opportunity for early payment and the amount and types of penalties (fines, penalties, etc.) for failure to implement transfer of currency. In the latter case, the delay in payment associated with a decrease of the course, will be justified only if the decrease in the cost of currency at the new rate will override the amount of assessed penalties. It should be noted that the management of foreign exchange positions by means of balance sheet operations often do not correspond to their own needs and plans of the bank, and sometimes a disadvantage in terms of costs. However, domestic banks are forced to resort to such methods in the absence of the necessary conditions for the use of more modern and advanced methods of management of foreign exchange positions, such as, in particular, as a forward exchange transaction. The method of hedging, or synthetic control, provides for protection against foreign exchange risks of additional imprisonment term foreign exchange transactions, which can compensate for certain financial losses on balance sheet items by currency fluctuations. Advantages of synthetic control: flexibility, there are possibilities for rapid maneuver without changes in bank balance, the ability to respond rapidly to variations in the ratio of assets and liabilities in foreign currencies. Therefore, a necessary condition for the effectiveness of this method is the existence of a liquid futures market, which would make it possible to perform operations with derivative instruments at any time and in any quantity. Category: Management Operations Commercial Bank | Tags: Probability