Every answer and its explanation appears here once you have finished the path. Each one then links to the matching glossary entry, where the concept is set out in full with its worked example.
1. An insured indemnified at 95 percent of a receivable finds it recovered markedly less than expected in euros. Where does the gap come from?
From the applicable rate clause: the indemnity is computed in the receivable's currency, and if conversion uses the settlement date rate, all the currency movement since stays with the insured
This is the trade's commonest disappointment, and its cause is a line that does not stand out on reading: on a long receivable that clause weighs more than the cover percentage everyone argued about. The insurer owes what it guaranteed, in the guaranteed currency, and the conversion date decides the rest. The costs and deductible answers name real deductions, which appear on the statement and which the insured sees, whereas the currency gap does not look like a deduction: it looks like an amount that does not add up. That is what makes it hard to diagnose afterward and easy to prevent beforehand.
Glossary entry · assurance-credit-export2. Textbooks present non-payment risk and currency risk as independent. What is observed in practice?
That they are correlated the unfavorable way: a country rationing currency or restructuring its debt sees its money depreciate, and it is the same crisis that causes the default
Default arrives when the currency is low, and an exporter that invoiced in local currency to ease the sale then discovers it added the two exposures instead of spreading them. It is the same correlation structure met on the insurer's own soundness, which deteriorates when its insureds are notifying. The favorable correlation answer keeps a real effect from the DEBTOR's side, whose local debt lightens, and applies it to the creditor, for whom the same depreciation is a loss: the error is switching sides without saying so. And the exchange regime changes the size of the move, not the direction of the correlation.
Glossary entry · risque-pays3. An exporter invoices in a hard currency so as not to bear currency risk. What exactly has it done?
It has transferred it to the buyer, at a commercial cost and with a perverse effect: the buyer must obtain foreign currency, making it dependent on an administrative authorization and moving the problem toward non-transfer
The invoicing currency is an exposure decision and not a commercial convenience, and neither solution is good in itself: invoicing in local currency removes the administrative dependency and brings currency risk home to the seller. The choice is made knowing which of the two risks one prefers to bear, which presupposes knowing which one can be hedged. The removal answer is what the sales side retains, and it conjures away the displacement. The one invoking better insurability is the most instructive: a hard currency receivable on a buyer that will not be able to obtain that currency is no more insurable, it has simply changed risk family.
Glossary entry · inconvertibilite-devises4. A currency hedge is set on the invoice's contractual due date. The buyer does not pay. What happens?
It is left with no underlying, and unwinding produces a loss of its own, independent of the receivable: the hedge outlives what it was hedging
A classic currency hedge assumes a certain flow on a certain date, whereas an insured export receivable is uncertain on both counts, in amount since a loss pays only a percentage, and in date since an indemnity arrives after a qualifying period and handling. The two answers making the hedge vanish at no cost describe what one would wish rather than what a financial instrument does: an undertaking to sell a currency at a given rate unwinds at the day's rate, gain or loss, whether the underlying exists or not. Automatic rolling does not exist either, and that is precisely what has to be sought, through an open dated or split hedge.
Glossary entry · delai-carence5. In what order are the module's three checks made, and why that order?
The invoicing currency and what it transfers, the applicable rate clause and the date it retains, then the fit between the hedge's maturity and the real timetable of an indemnity
The order matters because each reading determines the next: the currency decides who bears what, the rate clause determines what is LEFT to hedge, and depending on whether it retains the sale date, the due date or the settlement date, the residual exposure changes nature and sometimes disappears. Starting with the hedge means hedging before knowing what, which is the natural order in a treasury department and the costly one here. The answer calling the three independent is the most common and explains why this work is rarely done: three separate readings get spread across three departments, and nobody does them in order.
Glossary entry · principe-indemnitaire