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Running head: EXCHANGE TRADED FUNDS 1
EXCHANGE TRADED FUNDS
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EXCHANGE TRADED FUNDS 2
Introduction
A certain bookseller company that had been doing business only within the United States
decides to grow much further across other nations by branching out in other regions in South
America, South East Asia and in other regions in the Middle East. However after the firm
branched out, there are consequences it faces. This action exposes the firm to foreign exchange
risks. The entire firm’s transactions are managed by two banks. It is these two banks that offer
the hedging services for the firm (A hedge is basically an investment position that is meant to
offset all the potential gains or losses that are likely to be incurred by a companion investment.
Generally, a hedge is used in reducing any profit or loss that is likely to be sustained by an
organization or an individual). Then comes the problem that will affect the firm’s activities, both
the two banks announce a major significant increase in their fees in providing their services. For
these reasons, the firm’s managerial department has to discuss on how to limit the hedging
activities to only one among the various used hedging methods (Kiesel, Scherer, & Zagst, 2010).
Alternative
Exchange Traded Funds (ETFs) usually are appealing to various investors either large
scale or small scale investors. New investors to ETF usually make an assumption that the funds
that are involved are basically used as a mutual fund substitute. The use of ETFs has rapidly
expanded and grown progressively far much beyond the realm of just passively investing in
managing of funds (Kiesel, Scherer, & Zagst, 2010). As for the cases of the experienced
investors, Exchange Traded Funds are mostly used in the investing of classic and crucial assets

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