Do most multinationals (ie companies operating in multiple countries) hedge themselves against exchange rates?
Companies always try and hedge pretty much everything, they like to know the cost of everything, it gives them a ‘known’ businesses don’t like uncertainty. People who work in the city are those that will try and profit from this, lots of them are employed to take risks and make money on exchange rates and lots of other things.
Yes they do. the most common types of protection are Forward Contracts (fixing the rate now for a future requirement) and Stop Loss/Limit Orders (giving a best and worst case scenario) any company paying or receiving foreign companies would do well to look at forward contracts, as it allows a fixed cost to be applied, and therefore helps budgeting.
