Assignment 3

Hedging Name Institution Course and Code Professor Date Hedging Hedging refers to the companies' core risk management strategies that aim to minimize possible losses incurred due to price changes (Shao et al., 2019). In the unstable environment of publicly traded corporations, such as Amazon.com, hedging is a crucial strategy for mitigating the effects of fluctuating foreign exchange rates, interest rates, or commodity prices. Amazon.com can effectively shield its financial performance and shareholder value from market uncertainties by strategically applying these options, futures, and swaps as hedging instruments. Amazon.com operates globally, demonstrating the ability to be exposed to the currency exchange rate risk since the value of foreign currencies changes against the US dollar. For example, a dollar strengthening will be unfavorable to Amazon.com's international sales revenue when converted back into dollars. To mitigate this risk, Amazon.com can apply currency hedging strategies (Basanna & Vittala, 2019). Amazon.com may secure favorable exchange rates, financial stability, and profit margins through currency forward contracts or options. Through this preventive guide, Amazon.com can protect itself from the unfavorable consequences of currency variations of the business result, staying financially stable as a company operating worldwide. Additionally, Amazon.com ensures it is a responsible custodian of shareholder value despite the ups and downs of currency markets, using sound currency hedging practices for risk management. Interest rate fluctuations could also pose risks to Amazon.com, particularly...