Question

Mark is the manager of an american company. he expects the value of the british pound to appreciate in the near future. hence, he delays the collection of payments from british customers until the next month. which tactic is mark making use of to minimize the foreign exchange exposure?

Answer 1

Mark is using what is called a lag strategy. A lag strategy can be used when there is an intended change in payment in a foreign transaction. This usually occurs when there is an expected change occurring in exchange rates. The lag occurs when the transaction is delayed, which is what Mark is attempting to do here.