Putting adsense link unit below tab menu or header is a simple trick but quite effective to increase your income. Adesense type or format that is suitable to be placed below the header / menu tab is adsense horizontal link units (728x15 and 468x15 with 4 or 5 links). I have putted my 728x15 horizontal links unit and since I installed adsense link units below the tab menu, the number of clicks is increased. That's it, adsense placement below header / tab menu may increase the possibilities of being clicked by visitors. Why? Do you know... people tend to avoid clicking ad. Look at my tab menu section... with a combination of ad colors that match with the tab menu's background will disguise the ad (google adsense ad links will looks similar with tab menu links), so visitors may not aware with the difference between tab menu links and ad links, thus there are high possibilities that they will click the ad. If you have not installed adsense link units below header / tab menu, why don't you try it?
10 SEO Tips For New Blogger
In this post I want to share my experience about SEO. Some of you maybe already know very well about SEO technique but let me (the newbie) share my experience about SEO. Hopefully this post can be useful and give you additional information to improve your site rank.
According to Wikipedia, SEO (search engine optimization) is the process of improving the volume or quality of traffic to a web site from search engines via "natural" ("organic" or "algorithmic") search results. Hmm.. I can say SEO like an art to improve our site recognition on search engine, gaining more traffic and to get listed in top ten (or at least in the first page of search engine result's search) in most popular search engine (especially Yahoo and Google). As you can see in the figure below, Yahoo and Google dominate all major search engine on the internet world.
*Note* The picture above taken from www.seomoz.com *Note*
Based on my experience, here are the necessary step / SEO effort that can be usefull for new blogger :
1. Choose Your Template
Not a joke, choose the best template (it depends on blogger's objectives). Some of you might be want to be adsense publisher, so choose the best templates that has good structure for placing your adsense ads. Some of templates are designed and / or already modified by SEO experts, I think it's better to choose SEO friendly templates.
2. Customize Your Templates
Editing your meta tags (usually title, description, keyword and robot) is important before submitting your blog to search engine. It can help search engines to list your sites in their indexes more faster and accurate. I already discuss about meta tags in the previous post. For further explanations about meta tags click here.
Other modifications, for example: adding social bookmark toolbar.. How? Go to addthis.com, get addthis toolbar script and implement the script on your blog.
Changing nofollow attributes to dofollow on comment section can be considered to increase your page impression -> dofollow blog can attract your reader to comment on your blog, because they'll get a free backlink.
3. Getting Indexed
Submit your site link to major search engine. Based on the picture above thus we can say it is very important to submit our site to the leading search engine (that is Google, Yahoo and MSN)
- To submit your site on google, go to : http://google.com/addurl/
- To submit your site on Yahoo, go to : https://siteexplorer.search.yahoo.com/submit
- To submit your site on MSN, go to :
http://search.msn.com/docs/submit.aspx?FORM=WSDD2
There are several free submit service to submit your site to major search engines such as MyPagerank.net
Other free submit service : http://www.submitexpress.com/
*Note* Use one of them to submit your site, after submit you can resubmit your blog at least in one month *Note*
4. Submit Your Blog to Blog Directories
Recommended directories :
http://www.technorati.com
http://www.blogexplosion.com
http://blog-indonesia.com --> for Indonesian blogger
http://www.blogcatalog.com
http://www.bloghop.com
http://www.blogarama.com/
http://www.blogdigger.com/add.jsp
http://www.blogpulse.com/submit.html
http://www.blog-directory.org/add-blog.php
http://delicious.com/ --> formerly http://www.del.icio.us/
5. Install Alexa Widget & Toolbar
Alexa is a site who give rank for all websites based on the visitors traffic from that's blog or site. This is one of the most accurate freely available tools to find out how well your site ranks up against millions of other sites on the Web.
- Install alexa widget on your blog / website
- Install alexa toolbar on your browser. Download alexa toolbar here
- Write an article about alexa traffic rank and post it in your web site. It will make your web page more SEO friendly for alexa.
6. Keep Update Your Blog
.... hmm can't say anymore just keep your blog up to date. "CONTENT IS THE KING"
7. Blogwalking & Exchange link
No doubt that blogwalking is very important to get more traffic. Don't forget to comment on every blog that you've visited. Use url input to submit your blog. Better if you comment on blog that doesn't have nofollow attribute so your blog will be indexed by Google. Exchange link and get backlink with blogs especially the blog that has a high pagerank is very important. You will get a quality backlink if your blog have a backlink from high pagerank blog and have the relevant or same topic with your blog. Get as many backlink as possible !
8. Social Bookmarking Submissions
You can use free social bookmarking service like www.socialmarker.com
Get a socialbookmarker toolbar from socialmarker.com or addthis.com
It can help you spread a link on the best social bookmarking sites, you'll get a lot of backlinks and it can help you to increase your site's traffic. Your link gets indexed by Google in a matter of minutes.
9. Create signature on forums / Mailing list
This way suitable for you whom like post on forum / mailing list. Use signature facility to promote your blog. Create brief description to explain your blog so people will interest to click your signature.
10. Ping your blog
Ping services allow you to automatically notify blog directories and search engines that your blog has been updated. There are many free ping service on the net. You can choose one to ping your blog. Here are the list of recommended ping service:
- http://mypagerank.net/service_pingservice_index
- http://pingomatic.com/
- http://www.pingoat.com/
Note : "Ping your blog only if your blog has been updated"
According to Wikipedia, SEO (search engine optimization) is the process of improving the volume or quality of traffic to a web site from search engines via "natural" ("organic" or "algorithmic") search results. Hmm.. I can say SEO like an art to improve our site recognition on search engine, gaining more traffic and to get listed in top ten (or at least in the first page of search engine result's search) in most popular search engine (especially Yahoo and Google). As you can see in the figure below, Yahoo and Google dominate all major search engine on the internet world.
*Note* The picture above taken from www.seomoz.com *Note*Based on my experience, here are the necessary step / SEO effort that can be usefull for new blogger :
1. Choose Your Template
Not a joke, choose the best template (it depends on blogger's objectives). Some of you might be want to be adsense publisher, so choose the best templates that has good structure for placing your adsense ads. Some of templates are designed and / or already modified by SEO experts, I think it's better to choose SEO friendly templates.
2. Customize Your Templates
Editing your meta tags (usually title, description, keyword and robot) is important before submitting your blog to search engine. It can help search engines to list your sites in their indexes more faster and accurate. I already discuss about meta tags in the previous post. For further explanations about meta tags click here.
Other modifications, for example: adding social bookmark toolbar.. How? Go to addthis.com, get addthis toolbar script and implement the script on your blog.
Changing nofollow attributes to dofollow on comment section can be considered to increase your page impression -> dofollow blog can attract your reader to comment on your blog, because they'll get a free backlink.
3. Getting Indexed
Submit your site link to major search engine. Based on the picture above thus we can say it is very important to submit our site to the leading search engine (that is Google, Yahoo and MSN)
- To submit your site on google, go to : http://google.com/addurl/
- To submit your site on Yahoo, go to : https://siteexplorer.search.yahoo.com/submit
- To submit your site on MSN, go to :
http://search.msn.com/docs/submit.aspx?FORM=WSDD2
There are several free submit service to submit your site to major search engines such as MyPagerank.net
Other free submit service : http://www.submitexpress.com/
*Note* Use one of them to submit your site, after submit you can resubmit your blog at least in one month *Note*
4. Submit Your Blog to Blog Directories
Recommended directories :
http://www.technorati.com
http://www.blogexplosion.com
http://blog-indonesia.com --> for Indonesian blogger
http://www.blogcatalog.com
http://www.bloghop.com
http://www.blogarama.com/
http://www.blogdigger.com/add.jsp
http://www.blogpulse.com/submit.html
http://www.blog-directory.org/add-blog.php
http://delicious.com/ --> formerly http://www.del.icio.us/
5. Install Alexa Widget & Toolbar
Alexa is a site who give rank for all websites based on the visitors traffic from that's blog or site. This is one of the most accurate freely available tools to find out how well your site ranks up against millions of other sites on the Web.
- Install alexa widget on your blog / website
- Install alexa toolbar on your browser. Download alexa toolbar here
- Write an article about alexa traffic rank and post it in your web site. It will make your web page more SEO friendly for alexa.
6. Keep Update Your Blog
.... hmm can't say anymore just keep your blog up to date. "CONTENT IS THE KING"
7. Blogwalking & Exchange link
No doubt that blogwalking is very important to get more traffic. Don't forget to comment on every blog that you've visited. Use url input to submit your blog. Better if you comment on blog that doesn't have nofollow attribute so your blog will be indexed by Google. Exchange link and get backlink with blogs especially the blog that has a high pagerank is very important. You will get a quality backlink if your blog have a backlink from high pagerank blog and have the relevant or same topic with your blog. Get as many backlink as possible !
8. Social Bookmarking Submissions
You can use free social bookmarking service like www.socialmarker.com
Get a socialbookmarker toolbar from socialmarker.com or addthis.com
It can help you spread a link on the best social bookmarking sites, you'll get a lot of backlinks and it can help you to increase your site's traffic. Your link gets indexed by Google in a matter of minutes.
9. Create signature on forums / Mailing list
This way suitable for you whom like post on forum / mailing list. Use signature facility to promote your blog. Create brief description to explain your blog so people will interest to click your signature.
10. Ping your blog
Ping services allow you to automatically notify blog directories and search engines that your blog has been updated. There are many free ping service on the net. You can choose one to ping your blog. Here are the list of recommended ping service:
- http://mypagerank.net/service_pingservice_index
- http://pingomatic.com/
- http://www.pingoat.com/
Note : "Ping your blog only if your blog has been updated"
How to Put Adsense Inside Blog Posts (for Blogger or Blogspot)?
Adsense inside blog posts can be considered to increase or optimize your adsense revenue. It certainly can increase your CTR (Click Through Rate). Adsense, there are alternatives to put it inside posting, below the page title (like in this post) or below your article, and you can also set your adsense alignment (right or left). Many blogger or blogspot users experienced difficulties, especially new user to put adsense inside the posting. Well.. it is not too difficult, in this post I will show you the easy way to put adsense inside your post. Just follow these steps to put adsense inside blog post.
How To Create "Read More" Blogspot Blogger
Read more on blogspot or blogger blog is considered as the important element. As blogger user I think you should add the "read more" to simplify your blog posts in your home page, then your home page should not be too long, viewing each post with fullpost all in your homepage. Not only that, viewing only one paragraph per each post in your homepage makes your blog / website more fast loading and you still can view many blog posts on your homepage with simple view. Once your visitors / readers click the "read more" link or post title, they will directed to your post page (fullpost). Default blogger template usually does not have a "read more" tag, so you have to add read more on blogspot manually. UPDATE : Click : New Blogger Read More - Jump Break
Brand Value
Brand???
Oh, it is the name of a product or service ...
What is in a name? All of us know that statement came from William Shakespeare. According to him, name is not important. Rose will not change the fragrance even though that flower changes its name. But for marketers, name of a product is very important, because of it gives a value to the thing that we are offer to consumers.
Do you think it is important?
Think about this... which one will u choose for a product? The famous one or not the famous one?
I believe that purchaser perception is much more important than reality. It depicts that image value of an item can stays longer in customer mind and influences their buying behavior. Many Indonesian’s family will prefer Honda as their motorcycle rather than any other brands (and most of you riding honda, am I right? ). We can not deny that Honda builds the brand image very well, so no wonder it becomes the most sales for several tens years.
Secondly, brand describes a special position of a product. Furthermore it differentiates one product to the same kind of others. On the previous time, name of a good is not too important but since competitions are very high, the producers have to think several times to give it a proper name. Kodak for instance, it took numerous research to find the fit name that easy to read and has no meaning in each country. No doubt, nowadays everybody knows and always relate Kodak to a good quality camera.
On the other hand, many products fail because of wrong chosen name. In the 1970’s, German exported a farming machine to Indonesia. Our country is very potential market at that time, because of the government emphasized on agricultural sector. Unfortunately, that machine’s brand had an impolite meaning in Javanese language that related to one kind of women’s organ vital. As a result, the sales were not high as expected by the producer.
In conclusion, brands offer a lot of advantages to customers and producers. Brands are valuable tangible asset, so it has to be managed carefully. Brands can act various different roles within the brand portfolio. Last but not least, giving brand name to a product has not to be difficult or easy to read and understand, has no bad meaning in different language, and we must not forget that the product is needed by consumers.
Oh, it is the name of a product or service ...
What is in a name? All of us know that statement came from William Shakespeare. According to him, name is not important. Rose will not change the fragrance even though that flower changes its name. But for marketers, name of a product is very important, because of it gives a value to the thing that we are offer to consumers.
Do you think it is important?
Think about this... which one will u choose for a product? The famous one or not the famous one?
I believe that purchaser perception is much more important than reality. It depicts that image value of an item can stays longer in customer mind and influences their buying behavior. Many Indonesian’s family will prefer Honda as their motorcycle rather than any other brands (and most of you riding honda, am I right? ). We can not deny that Honda builds the brand image very well, so no wonder it becomes the most sales for several tens years.
Secondly, brand describes a special position of a product. Furthermore it differentiates one product to the same kind of others. On the previous time, name of a good is not too important but since competitions are very high, the producers have to think several times to give it a proper name. Kodak for instance, it took numerous research to find the fit name that easy to read and has no meaning in each country. No doubt, nowadays everybody knows and always relate Kodak to a good quality camera.
On the other hand, many products fail because of wrong chosen name. In the 1970’s, German exported a farming machine to Indonesia. Our country is very potential market at that time, because of the government emphasized on agricultural sector. Unfortunately, that machine’s brand had an impolite meaning in Javanese language that related to one kind of women’s organ vital. As a result, the sales were not high as expected by the producer.
In conclusion, brands offer a lot of advantages to customers and producers. Brands are valuable tangible asset, so it has to be managed carefully. Brands can act various different roles within the brand portfolio. Last but not least, giving brand name to a product has not to be difficult or easy to read and understand, has no bad meaning in different language, and we must not forget that the product is needed by consumers.
Adam Air - Air Crash Investigation Video From National Geographic
*Note*
Air Crash Investigation Video - Adam Air .... I'm sorry if this posting cause inconvenience to readers, especially for the family of Adam Air accident victims. No offense just sharing for information. Hopefully this incident become a lesson for all of us, especially the parties that concerned. We hope this incident will never recur again in Indonesian air flight history.
*Note*
I'm sure that some of you already know about this video but let me share this information. I receive this information from MMUGM46 mailing list - Many thanks for my friend Mr. Priandi, long time no see, how are you in Scotland Pak? Thankyou for sharing this information. Okay, continue to the post, I already googling and search for information about Adam Air Crash to make this post, hope you enjoy watching the video and read the post.
About The Plane That Crash
Adam Air Flight 574 (Kl-574), a Boeing 737-4Q8 was scheduled domestic passenger flight between the Indonesian cities of Surabaya and Manado which disappeared in Majene, West Sulawesi at January 1st, 2007. This incident leaving rescuers searching a huge section of the sea for clues.
Chronology :
According to KNKT (Indonesian National Commissioner for Transportation Safety) in Kompas, initially, aircraft navigation equipment that is known as Internal Reference System (or IRS) is broken. IRS damage occurred in the last 13 minute flight before the plane fell. This damage divert both pilot attention from the flight instruments. Both pilot concentrated to repair IRS and they forget to looking at the other instruments. They do not realize the plane and sloping down near the sea. They are aware only two minute before the plane broke out into the sea. It's too late. Nothing can be done. All passengers and crew, amounting to 102 missing and considered dead.
The crash is only one of several flight transportation accidents in Indonesia, which have resulted in large-scale transport safety reforms in Indonesia, as well as the United States downgrading its safety rating of Indonesian aviation, and of the entire Indonesian fleet being to the list of air carriers banned in the EU. Due to several safety violations and financial trouble, Adam Air has gone out of business, it is closed.
There are also Adam Air FDR (Blackbox) record on the internet but for ethical reason I cannot provide you the link. Okay.. that's all for the Adam Air - Air Crash Investigation Video
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Source link:
http://www.youtube.com/watch?v=oo4heTtX7sY&feature=PlayList&p=B44294B6A46257D3&index=0
http://en.wikipedia.org/wiki/Adam_Air_Flight_574
http://www.kompas.com/read/xml/2008/03/25/12545960
Video link :
http://www.4shared.com/file/97495105/5be5e93d/NGC_Air_Crash_Investigation_-_The_Plane_That_Vanished__part_1_.html
http://www.4shared.com/file/97497443/7a28836c/NGC_Air_Crash_Investigation_-_The_Plane_That_Vanished__part_2_.html
http://www.4shared.com/file/97501870/22319679/NGC_Air_Crash_Investigation_-_The_Plane_That_Vanished__part_3_.html
http://www.4shared.com/file/97505491/4dcde552/NGC_Air_Crash_Investigation_-_The_Plane_That_Vanished__part_4_.html
http://www.4shared.com/file/97492805/c9e3ea0b/NGC_Air_Crash_Investigation_-_The_Plane_That_Vanished__part_5_.html
Do Follow or No Follow , What, Why and How ?
What is dofollow / nofollow? According to wikipedia , NOFOLLOW is an attribute value (in HTML code) that used to instruct some search engines that a hyperlink should not influence the link target's ranking in the search engine's index. Nofollow attribute values are most often used on sites with user generated content, like user comments and blogs. The idea of nofollow attribute actually is to preventing spam on comment section.
This idea (nofollow) is contrary with what we (blogger's) want. Many blogger user are hunting blog with dofollow attribute in the comment section. By making your blog comment section DOFOLLOW, it will make visitors more interesting to comment on your blog. Why ??? because the one who make comment on your blog will get FREE BACKLINK from the link that he / she write on comment section.
How do I know whether blogs have DOFOLLOW attribute on comment section (for blogger)?
The simple way is :
1. Go to the command section or click full post or click post's title
2. You will see comments, for example look at image below :
If it is NOFOLLOW then will be look like this
otherwise, DOFOLLOW blog in comment section will be look like this (no nofollow attribute)
Then, how to make your blog DOFOLLOW (for blogger user)???
Login to blogger account
1. Go to layout tabs
2. Go to edit HTML
3. Click expand template widget
4. Search (press Ctrl F) and find this code
<b:if cond='data:comment.authorUrl'>
<a expr:href='data:comment.authorUrl' rel='nofollow'>
5. Remove attribute rel='nofollow'
6. Thus it will be look like this :
<b:if cond='data:comment.authorUrl'>
<a expr:href='data:comment.authorUrl'>
7. Done, don't forget to save your template after changing your code
Make your visitor more interesting to comment on your blog by adding YOU COMMENT I FOLLOW widget (badge) from bloggerplugins.org like this
----------------------------------------------------------------------------
This Blog is part of the U Comment I Follow movement in blogosphere.Means the comment field of this blog is made DOFOLLOW.Spam wont be tolerated.
Okay, now you can try it by yourself, Happy Blogging !!!
----------------------------------------------------------------------------
Source :
http://en.wikipedia.org/wiki/Nofollow
http://artsavenue.org/tips/opinion-and-tips/how-to-making-dofollow-on-blogspot.html
http://www.blogywalker.co.cc/2009/02/cara-mengetahui-status-blog-dofollow.html
This idea (nofollow) is contrary with what we (blogger's) want. Many blogger user are hunting blog with dofollow attribute in the comment section. By making your blog comment section DOFOLLOW, it will make visitors more interesting to comment on your blog. Why ??? because the one who make comment on your blog will get FREE BACKLINK from the link that he / she write on comment section.
How do I know whether blogs have DOFOLLOW attribute on comment section (for blogger)?
The simple way is :
1. Go to the command section or click full post or click post's title
2. You will see comments, for example look at image below :
If it is NOFOLLOW then will be look like this
otherwise, DOFOLLOW blog in comment section will be look like this (no nofollow attribute)
Then, how to make your blog DOFOLLOW (for blogger user)???
Login to blogger account
1. Go to layout tabs
2. Go to edit HTML
3. Click expand template widget
4. Search (press Ctrl F) and find this code
<b:if cond='data:comment.authorUrl'>
<a expr:href='data:comment.authorUrl' rel='nofollow'>
5. Remove attribute rel='nofollow'
6. Thus it will be look like this :
<b:if cond='data:comment.authorUrl'>
<a expr:href='data:comment.authorUrl'>
7. Done, don't forget to save your template after changing your code
Make your visitor more interesting to comment on your blog by adding YOU COMMENT I FOLLOW widget (badge) from bloggerplugins.org like this
----------------------------------------------------------------------------
This Blog is part of the U Comment I Follow movement in blogosphere.Means the comment field of this blog is made DOFOLLOW.Spam wont be tolerated.
Okay, now you can try it by yourself, Happy Blogging !!!
----------------------------------------------------------------------------
Source :
http://en.wikipedia.org/wiki/Nofollow
http://artsavenue.org/tips/opinion-and-tips/how-to-making-dofollow-on-blogspot.html
http://www.blogywalker.co.cc/2009/02/cara-mengetahui-status-blog-dofollow.html
Exchange Rate Risk and Transaction Exposure
Each country has its own currency. Strength of the currency of a country is reflected in the currency exchange rate. We know that Indonesia has Rupiah, the United States had a currency US Dollars ($) and so on. For example if we want to have one (1) United States dollars so we can buy with a price of Rp. 10.000 (depending on the applicable exchange rate). This is the strength of a particular currency.
Currency exchange rate can change, even fluctuate at any time. Currency exchange rate of developed countries experience a sharp fluctuations. Changes in exchange rates can be at once the potential risks / opportunities for the business. Changes in currency exchange rate is influenced by many factors, it depend on the supply and demand to the currency, inflation, interest rate differences between countries, the level of a country's economy and the expectation that the parties concerned. Expectations of the currency exchange rate is influenced by the situation or condition of political, social and economic development.
Exchange Rate Risk
Exchange rate risk is defined as the variability in value of money that is caused by uncertain exchange rate changes. Exchange risk is viewed as the possibility that currency fluctuations can alter the expected amounts or variability in the future cash flows.
International Transaction Exposure
Changes in currency exchange rates may cause changes in cash flow. This potential changes in cash flow is exposure. Exposure can be measured clearly in some situations, such as transaction exposure. For example, Indonesian exporters have signed contracts to export goods worth $ 1 million to American companies that will be paid in 6 months. Risk of exchange rate changes can cause changes in cash flow due to exchange rate Rp / $ can be changed at 6 months. At the core of the contract at a certain rate while the exchange rate in the future can be changed so that cash transactions of the future of the contract is uncertain.
Risk Analysis of International Transaction (refer to Hanafi's risk sequence analysis) - click image to enlarge
Managing Transaction Exposure
Transaction exposure can be manage, so that the loss on cash flow in the future can be minimized. Management of transaction exposure can be done with the exchange rate forecasting to assist decision making. Various methods of hedging is also used to minimize the risk of loss exposure of the transaction.
Exchange Rate Forecasting --- There are several method to predict or forecast exchange rate in the future, there are technical forecasting, fundamental forecasting, market based forecasting, and mixed forecasting.
Hedging --- Hedging is the taking of a position, acquiring either a cash flow, an asset, or a contract (including a forward contract) that will rise (fall) in value and offset a fall (rise) in the value of an existing. Hedging is very important to protect the potential loss and reduces the variance of future cash flow, so that is expected to reduce the risk of uncertainty. Hedging can be done with derivatives instrument (such as forward contact, futures, call and put options), money market hedging, risk shifting, and netting exposure.
For further explanation about managing transaction exposure, I will write it on the next post on this blog.
-----------------------------------------------------------------------------
Source :
Eiteman et al.,2004, “Transaction Exposure”, PPT Ch.8, Link: http://flash.lakeheadu.ca/~pgreg/assignments/4079chapter8n.pdf
Eun/Resnick, 2007, “International Financial Management”, PPT Ch.8 (Management of Transaction Exposure), McGraw-Hill, Inc., Fourth Edition, Link : http://www.westga.edu/~chodges/pdf/erch08ppt.pdf
Hanafi,M.M, 2003, “Manajemen Keuangan Internasional”, BPFE, Edisi 2003/2004, Yogyakarta.
Hanafi,M.M, 2006, “Manajemen Resiko”, UPP STIM YKPN, Cetakan Pertama, Juli 2006, Yogyakarta.
Saunders / Cornett, 2006, “Financial Institutions Management, A Risk Management Approach”, McGraw-Hill, Inc., Fifth Edition, Singapore.
Currency exchange rate can change, even fluctuate at any time. Currency exchange rate of developed countries experience a sharp fluctuations. Changes in exchange rates can be at once the potential risks / opportunities for the business. Changes in currency exchange rate is influenced by many factors, it depend on the supply and demand to the currency, inflation, interest rate differences between countries, the level of a country's economy and the expectation that the parties concerned. Expectations of the currency exchange rate is influenced by the situation or condition of political, social and economic development.
Exchange Rate Risk
Exchange rate risk is defined as the variability in value of money that is caused by uncertain exchange rate changes. Exchange risk is viewed as the possibility that currency fluctuations can alter the expected amounts or variability in the future cash flows.
International Transaction Exposure
Changes in currency exchange rates may cause changes in cash flow. This potential changes in cash flow is exposure. Exposure can be measured clearly in some situations, such as transaction exposure. For example, Indonesian exporters have signed contracts to export goods worth $ 1 million to American companies that will be paid in 6 months. Risk of exchange rate changes can cause changes in cash flow due to exchange rate Rp / $ can be changed at 6 months. At the core of the contract at a certain rate while the exchange rate in the future can be changed so that cash transactions of the future of the contract is uncertain.
Risk Analysis of International Transaction (refer to Hanafi's risk sequence analysis) - click image to enlarge
Managing Transaction Exposure
Transaction exposure can be manage, so that the loss on cash flow in the future can be minimized. Management of transaction exposure can be done with the exchange rate forecasting to assist decision making. Various methods of hedging is also used to minimize the risk of loss exposure of the transaction.
Exchange Rate Forecasting --- There are several method to predict or forecast exchange rate in the future, there are technical forecasting, fundamental forecasting, market based forecasting, and mixed forecasting.
Hedging --- Hedging is the taking of a position, acquiring either a cash flow, an asset, or a contract (including a forward contract) that will rise (fall) in value and offset a fall (rise) in the value of an existing. Hedging is very important to protect the potential loss and reduces the variance of future cash flow, so that is expected to reduce the risk of uncertainty. Hedging can be done with derivatives instrument (such as forward contact, futures, call and put options), money market hedging, risk shifting, and netting exposure.
For further explanation about managing transaction exposure, I will write it on the next post on this blog.
-----------------------------------------------------------------------------
Source :
Eiteman et al.,2004, “Transaction Exposure”, PPT Ch.8, Link: http://flash.lakeheadu.ca/~pgreg/assignments/4079chapter8n.pdf
Eun/Resnick, 2007, “International Financial Management”, PPT Ch.8 (Management of Transaction Exposure), McGraw-Hill, Inc., Fourth Edition, Link : http://www.westga.edu/~chodges/pdf/erch08ppt.pdf
Hanafi,M.M, 2003, “Manajemen Keuangan Internasional”, BPFE, Edisi 2003/2004, Yogyakarta.
Hanafi,M.M, 2006, “Manajemen Resiko”, UPP STIM YKPN, Cetakan Pertama, Juli 2006, Yogyakarta.
Saunders / Cornett, 2006, “Financial Institutions Management, A Risk Management Approach”, McGraw-Hill, Inc., Fifth Edition, Singapore.