Introduction In an environment that is increasingly becoming global, international business is gradually changing into a norm rather than an exception. More businesses and investors are gaining interest in cross-border businesses and investments. Husted and Melvin in their book look at this issue in detail, discussing three important issues, namely, foreign exchange risk, forecasting and international investments. Foreign exchange risk When engaging in any kind of cross border business, investors expose themselves to foreign exchange risks. A foreign exchange risk is the risk which results from unpredictable changes in the foreign exchange rate, making it uncertain to gauge the real value of foreign transactions (Husted & Melvin, 2010, pp. 383). Every foreign transaction is influenced by the foreign exchange rates. This necessitates the need for forecasting to individuals and firms involved in the international business. There are three kinds of risks in regards to international investors and businesses. These are accounting exposure, transaction exposure and economic exposure. Accounting exposure otherwise also known as translation exposure, emanates from differences between foreign currencies dominated assets and foreign currencies dominated liabilities. There is always a danger on equity falling if the concerned foreign currency depreciates to the level of the home currency. Transaction exposure, on the other hand, occurs when there is uncertainty in regards to the domestic currency future value of a transaction dominated by a foreign currency (Wang, 2009, pp. 345). This kind of exposure requires the firms involved to either hedge through forward contracts or face the risks. The third type of exposure and the most important one to the firm is economic exposure. Economic exposure arises from changes in exchange rates. The level, direction and extent of exchange rate changes are always unstable. This poses uncertainty on the future profitability of business. There are various ways investors can hedge against foreign exchange risks and through which investors can protect themselves from over-exposure to foreign exchange risk. They include:   * domesticating foreign transactions,   * either speeding and slowing of making payments when currencies are expected to appreciate and depreciate respectively;   * Options, forwards, and futures markets. There are some other implications, hedging being one of them. Hedging presents the possibilities of earning what is generally known as a risk premium. A foreign exchange risk premium refers to the difference in rates between the forward and expected future spot rate (Husted & Melvin, 2010, pp. 386). A risk premium is measured in terms of its effective return differential. Effective return differential of a risk premium refers to the percentage difference between a forward future rate and expected future spot rate. Whenever this differential yields a positive outcome, there appears a positive risk premium on the domestic currency. If the market is efficient and all the parties involved in making hedging decisions are availed and aware of all the information required to make those decisions, then a forward rate will differ with an expected fut